Many Australian small businesses import. A manufacturer buys components, raw materials or machinery from overseas. A distributor imports finished products to resell. A retailer sources its own branded range from a contract manufacturer. Importing can cut costs, widen the range of products available and give access to capabilities that are not available locally.
It also brings risks that domestic purchasing does not: unfamiliar suppliers, long lead times, currency movements, customs and biosecurity rules, product safety obligations and the difficulty of fixing problems on the other side of the world. The chairman of one of India’s largest exporters has summarised the essentials of international trade as four things to get right: product quality and on-time delivery, working capital, marketing and procedure. The same four apply to importers.
This article explains how to choose and manage overseas suppliers, how to calculate the true landed cost, how customs, GST and biosecurity work in outline, what product safety duties importers carry and how to pay safely. It is general information. Import rules change and depend on the goods, so confirm requirements with the Australian Border Force, the Department of Agriculture, Fisheries and Forestry and a licensed customs broker.
Should you import at all?
Before importing, compare it honestly with local supply:
- Total cost, not just unit price: freight, duty, broker fees, inspection, currency, inventory holding and the cost of problems.
- Lead time and flexibility: overseas orders often take weeks or months, and minimum order quantities can be large.
- Quality risk: inspecting quality before goods leave the factory is harder.
- Working capital: importing often means paying well before you sell, tying up cash in goods at sea.
- Supply resilience: long supply chains are vulnerable to shipping disruption, port congestion and geopolitical events.
- Customer expectations: some customers value Australian-made products or need short lead times.
Many businesses use a mix: imported items where scale and price matter, local supply where speed, flexibility or quality control matter more. The article on make or buy decisions covers the wider sourcing choice.
Finding and qualifying suppliers
Where to look
- Trade shows in Australia and overseas.
- Online business-to-business marketplaces.
- Industry associations and trade commissioners.
- Referrals from other importers and customs brokers.
- Sourcing agents who work in the supplier’s country.
Qualify before you commit
- Check the business is real: registration, address, years of operation and export history.
- Ask for references from customers in Australia or similar markets.
- Request samples, and test them against your specification.
- Audit the factory, in person or through an independent inspection company, for capability, quality systems and working conditions.
- Confirm certifications relevant to your product, such as quality management systems or product-specific approvals.
- Start small: a trial order before a large commitment.
Write a clear specification and contract
Ambiguity causes most import disputes. Specify materials, dimensions, tolerances, finishes, packaging, labelling, testing requirements and acceptance criteria. A written supply agreement should cover price, quantities, delivery terms, payment terms, quality standards, inspection rights, warranty, intellectual property and how disputes will be resolved.
If you share designs, protect them with confidentiality agreements and, where appropriate, registered rights in the supplier’s country.
Incoterms: who pays for what
Incoterms are internationally recognised rules that define where responsibility and risk pass from seller to buyer. Common ones for importers include:
| Term | Meaning in brief |
|---|---|
| EXW (Ex Works) | You collect from the supplier’s premises and handle everything after that |
| FOB (Free On Board) | The supplier delivers goods onto the vessel at the origin port. You handle sea freight and everything after |
| CIF (Cost, Insurance and Freight) | The supplier pays freight and minimum insurance to the destination port, but risk passes when goods are loaded |
| DAP (Delivered At Place) | The supplier delivers to a named place, and you handle import clearance and duties |
| DDP (Delivered Duty Paid) | The supplier handles everything, including import duties and taxes |
FOB is popular with Australian importers because it gives control over freight, often at a better price, while the supplier handles export clearance. Whatever term you use, make sure the contract states it precisely, including the named place and the Incoterms version.
Calculating landed cost
The landed cost is the full cost of getting goods to your premises. Underestimating it is one of the most common importing mistakes.
An illustration
A business imports 1,000 units at a supplier price of US$10,000 FOB. Assume an exchange rate of US$0.65 per Australian dollar.
| Cost item | Amount (AUD) |
|---|---|
| Goods (US$10,000 ÷ 0.65) | 15,385 |
| International freight and insurance | 2,500 |
| Customs duty at an assumed 5% of the customs value | 769 |
| Customs broker, port and terminal charges, local delivery | 1,200 |
| Landed cost before GST | 19,854 |
| Landed cost per unit | 19.85 |
In Australia, customs value is generally based on the price of the goods at the point of export, so duty is calculated on that value rather than on the cost of international freight. Import GST of 10 per cent is then charged on the value of the taxable importation: broadly the customs value plus duty plus international transport and insurance. In this example, that is about $1,865. A GST-registered business can usually claim it back as an input tax credit, and eligible businesses can defer paying it until their business activity statement.
Many goods attract no duty, particularly from countries with which Australia has free trade agreements, if you have the correct proof of origin. Your customs broker can confirm the tariff classification and any concessions.
Then add the less visible costs:
- Currency movements between ordering and paying.
- Inventory holding: storage, insurance and the cost of the cash tied up.
- Inspection and testing.
- Defects and returns, which are expensive to resolve across borders.
- Your own time managing the process.
Customs clearance
The Australian Border Force administers customs. In outline:
- Goods above a value threshold require a full import declaration, which records the goods’ tariff classification, value, origin and the duty and GST payable.
- Lower-value consignments go through simpler clearance processes, but rules for low-value goods differ depending on how they arrive and who is buying.
- Most businesses use a licensed customs broker, who prepares declarations, classifies goods, calculates duty and GST, and arranges clearance.
Keep commercial invoices, packing lists, bills of lading or air waybills, certificates of origin and any permits. Records may be audited.
Prohibited and restricted goods
Some goods are prohibited or need permits. Asbestos is a notable example: Australia prohibits importing goods containing asbestos, and it has been found in imported products such as building materials, gaskets and some machinery components. Importers are responsible for ensuring their goods comply, so ask suppliers for evidence and consider independent testing for higher-risk products.
Biosecurity
Australia has strict biosecurity controls administered by the Department of Agriculture, Fisheries and Forestry. Many goods, including food, plant and animal products, timber and some packaging materials, have specific import conditions, which you can check in the department’s import conditions database. Wooden pallets and crates generally need to be treated and marked to international standards. Shipping containers and goods may be inspected, and non-compliant goods can be treated, exported or destroyed at the importer’s cost.
Check biosecurity conditions before you place an order, not when the goods arrive.
Product safety and consumer law
Importers carry significant responsibilities for the products they bring in:
- Mandatory standards and bans: some products must meet mandatory safety standards, and some are banned. The ACCC’s Product Safety Australia website lists them.
- Electrical equipment: many electrical products must meet Australian safety and electromagnetic compatibility requirements, and some must be registered before sale.
- Consumer guarantees: under the Australian Consumer Law, if the overseas manufacturer has no place of business in Australia, the importer is generally treated as the manufacturer. That means you may be responsible for consumer guarantees, product liability and recalls.
- Labelling: country of origin, trade descriptions, care instructions and other labelling rules may apply.
Make sure your supply agreement allocates responsibility for compliance, testing and recall costs, and consider product liability insurance.
Paying safely
International payment methods carry different levels of risk:
| Method | How it works | Risk to the importer |
|---|---|---|
| Payment in advance | Pay before goods are made or shipped | Highest. You rely entirely on the supplier |
| Deposit and balance | Pay part upfront, the balance before or after shipment | Moderate |
| Documentary collection, documents against payment | Your bank releases shipping documents when you pay | Lower. You pay when goods have shipped |
| Documentary collection, documents against acceptance | Documents are released when you accept a bill to pay at a later date | Lower, with credit time |
| Letter of credit | Your bank undertakes to pay the supplier when compliant documents are presented | Lower, but more costly and complex |
| Open account | Pay after receiving goods, on agreed terms | Lowest for you, usually available only to established buyers |
New supplier relationships often start with a deposit and balance, moving to better terms as trust builds. Always verify the supplier’s bank details through a known contact before paying, because payment redirection scams are common in international trade.
Currency risk
When you buy in foreign currency, exchange rate movements between ordering and paying can change your costs significantly. Options include paying in Australian dollars where the supplier allows it, building currency buffers into pricing and talking to your bank about tools for managing currency risk. Understand any product fully before using it.
Quality control
- Pre-production samples approved in writing.
- In-process checks for larger or complex orders.
- Pre-shipment inspection by an independent inspection company against your specification and agreed sampling plan.
- Incoming inspection when goods arrive.
- Feedback to the supplier on every defect, with corrective actions agreed.
Problems found before shipment are far cheaper to fix than problems found in your warehouse, or by your customers.
Planning lead times and stock
Importing usually means longer and less predictable lead times. Plan for:
- Production time at the supplier.
- Transit time, including transhipment.
- Customs and biosecurity clearance.
- Local delivery.
Hold enough safety stock to cover delays, and track supplier delivery performance. The article on demand forecasting for small manufacturers explains how to set reorder points.
A worked example
A small Perth business that makes agricultural spraying equipment buys pumps locally at $180 each. An overseas manufacturer offers equivalent pumps for about $95 FOB.
The owner calculates a landed cost of about $128 per pump, including freight, duty, broker fees and local delivery, then adds an allowance for currency movement, inspection and extra inventory. The real saving is about $40 per pump, not $85. On 1,500 pumps a year, that is still worth $60,000.
Before ordering, the owner obtains samples and has them tested, checks electrical compliance requirements for the pump motors, arranges a factory audit through an inspection company and confirms with a customs broker that a free trade agreement removes duty if a certificate of origin is supplied. The first order is a trial of 200 units, paid 30 per cent upfront and 70 per cent after a satisfactory pre-shipment inspection. The business keeps its local supplier for urgent orders.
Common mistakes
- Comparing unit prices instead of landed costs.
- Vague specifications, leading to disputes about quality.
- Paying everything upfront to an unverified supplier.
- Ignoring biosecurity, asbestos or product safety rules until goods are held at the border.
- Forgetting that the importer may be treated as the manufacturer under consumer law.
- Underestimating lead times and running out of stock.
Frequently asked questions
Do I need a customs broker? Not legally for every shipment, but most small importers use one, because classification, valuation and compliance errors can be costly.
Can I claim back import GST? Generally yes, if you are registered for GST and the goods are for your business. Your accountant can confirm, and can advise whether deferring GST suits you.
How do I find out the duty rate? Your customs broker can classify the goods under the tariff and check whether a free trade agreement applies.
Summary
Importing can reduce costs and widen your options, but only if you account for its full costs and risks. Qualify suppliers carefully, write precise specifications and contracts, and agree Incoterms clearly. Calculate landed cost, including freight, duty, broker fees, currency and holding costs, and understand how import GST works. Check customs, prohibited goods and biosecurity requirements before ordering. Remember that importers carry product safety and consumer law responsibilities. Choose payment methods that match the level of trust, verify bank details, control quality before shipment and plan for long lead times.
Sources: small-business training notes on starting an import and export business, together with general Australian import practice. Figures are illustrations. Rules change and depend on the goods, so confirm current requirements with the Australian Border Force, the Department of Agriculture, Fisheries and Forestry, the ACCC and a licensed customs broker. This article is general information, not legal, tax or customs advice.
