In the States, you can buy Chinese food. In Beijing you can buy hamburger. It’s very close. Now I feel the world become a big family, like a really big family. You have many neighbors. Not like before, two countries are far away.
– Jet Li
If you’ve ever thought about opening a food import company in China, you should try to find out the answers to the following questions:
• What is the population?
• Do you know about the growth rate of the food market in recent years?
• Do you know what the change in income has been in recent years?
• Do you know how many Chinese households would prefer to purchase foreign food for their babies?
• What were the total wine imports in 2013?
• How many items are sold per minute on Taobao?
• What is the projected value for the 2020 food market in china?
• How many administrative divisions are there in China?
Knowledge of your market is important. This article will help you to understand the food import market in China a little better. If you want to know the answers to the above and more, please read on.
Food Safety
This is an important issue for anyone who eats… Which is most of the human race! Chinese people (who number over 1.3 billion) are very aware of food safety, thanks to scandals involving restaurant such a KFC, Burger King and McDonald’s selling food which was out of date, and scandals involving cooking oil made from recycled sewerage… yes, from sewers. Because of this it is estimated that around 60% of Chinese households would prefer to feed their babies imported food.
The food market in China is growing at a rate of around 30% per year and with the national income having increased by 1300% since 1990, many have more disposable income than ever before. However, for businesses to import those products the following must be done:
• Registration with the General Administration of quality Supervision Inspection and Quarantine of the People’s Republic of China.
• Registration with the state entry-exit inspection and quarantine authorities.
• Some ingredients may need to be registered.
• Your products will need the right labels (in Chinese!).
HS Codes
When you bring things into China you have to get through Customs. To get through customs you need to have the right paper work. Different categories of goods require different amounts of paperwork, so it’s important to choose the right category code. China uses the HS (Harmonized Standard) code system which is an international system of categorizing goods for import.
The right code will make life easier for you. If two codes apply, use some common sense and guidance from an expert to decide which code is best.
Import Price
When you import goods you have to declare how much they are worth. This will differ from company to company, and customer to customer. However, there is a reasonable band of values. If your goods are outside of this reasonable band, customs agents will probably pay closer scrutiny to you.
Remember to be conservative, as what you say will affect the taxes you pay and also everything will be stored on a computer system for future customs records.
Pick Your Port
China is a big country with many ports and many customs officials. Each region and each official has its own characteristics. This means that it is easier to import goods in some places, than in others.
Here is Chinese proverb for you to consider:
天高皇帝远
Heaven is high and the Emperor is far away.
Logistics
It’s important to have a good customs agent or importer working with you, especially if you’re new to the market. Many things in China are easier to do, if you have a good relationship with the other parties involved. As a newcomer to China, you will not have all of the contacts that you need to ensure that things run smoothly. Find a good customs agent or importer as soon as possible.
Did you know that according to US Department of Agriculture, that during transportation, perishable products such as fruits and vegetables, total losses accounting for about 25 to 30 percent of total fruit and vegetable production? If your customs agent or importer is inexperienced, or lacks connections with Customs and Quarantine officials, delays are likely to occur.
The best importers provide a full service from Customs clearance all the way to marketing the product in one of China’s 34 administrative divisions. Food ingredients specialists will have good contacts among other manufacturers, and can advise on the products most likely to sell.
Did you know that in 2013, wine imports into China were worth US$1.56 billion?
Made in China
It can be cheaper to import raw materials or parts, and then to make your final product in China. This will take a certain amount of investigation in each case; however you may discover that you can pay less tax and face fewer losses by doing things this way.
Documents
If you don’t know Chinese, make sure that you get someone who does in-house. It’s better to know about all of the documents that you use and work with on a daily basis, this can lead to a more standardized streamlined process when importing your goods and also prevent expensive delays.
Timing
Every country has its own festivals and holidays… So does China! Not much gets done during some of these breaks, so plan for this in your business.
Incoterms
Incoterms (International Commercial Terms) are predefined commercial terms published by the International Chamber of Commerce. A discussion of the Incoterms themselves could fill a book, but in summary they specify who is responsible for certain import/export tasks.
For more information see: https://en.wikipedia.org/wiki/Incoterms
Intellectual Property
Branding is important. The best brands can be spotted easily by their packaging, logos, etc. Brands are valuable and add prestige to products. This prestige is the reason the people make, sell and buy knock-offs. It is important to protect your brand by making sure that you register all of your Intellectual Property rights, before you invest too much money into the business.
It is also important to give your brand a distinctive catchy Chinese name, which is easy to recognize. A great example is the Chinese name of Coca-Cola, which roughly translates as ‘Allowing your mouth to rejoice,’ whilst sounding similar to its name in English i.e. 可口可乐 (“kekoukele”).
WFOEs
We can them “woofies,” which makes them sound cuddlier than they are. They are in fact Wholly Foreign Owned Enterprises, a type of corporate entity in China which is owned by foreigners.
We always recommend having a corporate identity when doing business for 2 reasons:
1. They will give you a financial presence in China which will improve your credibility as a business.
2. They will protect your other assets should your business fail.
Other things to consider are:
• Do you want to sell directly to your end customers?
• Do you want to sell things to a subsidiary wholly owned by you?
The formalities and consequences of starting a company can be complex. If in doubt, contact a lawyer (our contact details can be found at the end of this article).
Trading Online
Approximately 48,000 items per minute are sold on Taobao. Taobao is one of the largest online retailers in the world. Opening a store on Taobao is a relatively simple way to gain an online presence.
However, to enter into any form of e-commerce online in China, an ICP filing must be made and to make an ICP filing you need a business registered in China.
Additionally, once you have made your ICP filing, you may not engage in delivery or facilitating online payments. Separate licenses are required for these.
Kuaidi
Deliveries from online stores in China are usually done via Kuaidi. Kuadi is a type of courier delivery service in China. Most online goods sellers use Kuaidi and it is relatively cheap. However, you do get what you pay for in life! Make sure that you try to get feedback about deliveries from your customers when you delivery after service care. As complaints about Kuadi services in China happen often.
Technology
The food industry in China is predicted to be worth around US$650 billion by 2020. If you want your company to have a stake in that market, it is important to pay attention to your customers and to be seen doing so. Chinese companies like Xiaomi have become successful in part by pursuing this type of strategy and using active communication with their customers.
Technology can help us to do this by connecting us with our customers. Recently, Grabtalk was launched. It allows users to request products directly from the seller, using an instant messaging service.
Mindset
China is a unique country with its own unique history and culture. Try not to judge things by your own cultural standards if possible. It won’t do you any good, it won’t change anything.
Go with the flow is easy to say, but figuring out the flow is hard. Just remember to get to know locals with knowhow and to pay attention to national development policies i.e. the 5 year plans.
Conclusion
As per the old Chinese idiom:
创业难, 守业更难
To open a shop is easy; to keep it open is an art.
If you are ready to start your own food import business in China, we wish you luck!
By the way, have you got all the answers to the questions from the beginning?