Opening your online shop?
Be prepared to charge high prices.High shipping costs result in high prices
Let’s say you plan on opening a small online store in Singapore. It can be delicious food that you import from your home country, or sports equipment from China – literally anything.
The first piece of good news is that all 99% of goods imported into Singapore are non-dutiable (exceptions include alcohol, tobacco, cars and petroleum products). The second good news is that the GST is relatively low compared to your home country.
So, you build your web-site, using one of the shopping platforms, activate your Customs Account and place an order with your supplier. You do your calculations and add logistics costs to your retail price. This includes the total shipping cost, plus 7% GST, applicable if the value of your goods exceeds S$400. So far, so easy.
Yet, don’t take the initially appeared low entry barriers at its face value.
Let’s go through the whole process step-by-step together and see what it will cost you.
A packages of Japanese tomato is S$89, picture made on the 18th September 2020, Fair Price Bukit Timah Plaza, Singapore.
Shipping from China to Singapore: Your Typical First Experience
Let’s say you are opening a sports equipment’s online store and you want to import three pallets (3 very big boxes) of sports equipment from China by sea.
However, from here, be prepared for a long value chain. Your actual shipping costs will be far from what you initially planned. The process can look something like this:
Your goods are loaded onto a truck in China ($) -> … then they are delivered to the cargo terminal ($) -> The terminal requires paperwork, and a fee, for export ($) -> Your pallets are unloaded off the truck ($) -> … and then are loaded into a shipping container ($) -> … after which they then ship to Singapore ($130) -> Your goods successfully arrive in Singapore and then BAM!: you are handed a three-page-long list of chargeable activities from your import agent, which must be paid before your items can clear the port. Although you didn’t expect it, the last five miles have turned out to be the most arduous.
Get ready to pay:
- Customs permit fee (~$35)
- Delivery order (~$130)
- PSA wharfage (~$5) – does this word even exist?!
- Terminal handling (~$30)
- System charge (~$20)
- Forklift charge (~$75)
- Processing fee (~$50)
- Tally fee (~$25)
- Admin fee ($150)
- Washing charges (~$5)
- Labour fee (~$100)
- Handling charges (~$50)
- Tailgate (~$35)
- GST payment facilitation fee (~$30)
- GST on all the above ($)
-> At last, everything is good to go, so you pay the GST ($) -> Then, your container is delivered to a warehouse ($60) -> where it is then unloaded ($)
Remember that GST is applied to the total value of your goods, including shipping costs + insurance. Thus, if you purchased clothes for S$380 from Amazon or AliBaba and paid S$25 for shipping, the total amount will be S$405. As this exceeds the exemption limit of $S400 the goods will be subject to 7% GST.
Now, as you can see, there are a lot more costs associated with international shipping than first anticipated. After all of these have been factored in, you have ended up paying 5-6 times more than the initial calculation of just shipping (S$150) plus final mile charge (S$60)!
Yes, your first shipment – your first encounter with the complex world of logistics – can be frustrating. But as you grow, so does your experience. Very soon, you will have acquired a lot of know-how and will be able to manage those last-mile hidden costs, as well as being able to decide what level of risk you are willing to take in different deals.
Many unforeseen things can happen. In the example above, what if pirates seized the cargo? Unfortunately, this is still a real risk. In this situation, someone is going to lose goods and/or money. So, who is responsible for their replacement? This all depends on the Incoterms you agreed to!