Importing To Ireland - A Guide For SMEs

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Globalisation continues to change the way businesses operate, enabling SME importers in Ireland to trade with new, previously difficult to reach markets. However, it’s easy to be caught out by unexpected or hidden costs. Importing can help businesses reduce manufacturing costs and gain an edge in a competitive local market. But firms need to be aware of and prepared for the various costs involved to make sure their import activity makes sound business sense. Here's a guide for SMEs to importing to Ireland:


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An international outlook

Back in 2010, Ian Harkin launched toy firm Arklu with a Kate Middleton-inspired doll to mark her engagement to Prince William. This was followed, in April 2011, by a pair of dolls to mark the couple’s marriage. A further range – the inclusive Lottie doll – was then launched in 2012.

Harkin, who subsequently moved the business from London to Donegal in 2014, explains that while the dolls are designed in Ireland, they’re manufactured in China before being imported to Ireland, the UK and the US and sold on to mainly independent department stores. Arklu has warehouses in all three locations and at present imports around 200,000 dolls a year.

The company and its dolls are selling strongly, but Harkin is conscious of keeping a close eye on the costs associated with importing to keep Arklu’s cash flow and margins healthy.

“From day one we’ve been importing goods and are used to costs such as tariffs, import duties and VAT upfront as our warehouses are not bonded,” he says. “We don’t pay duties on toys going into our California warehouse because they don’t currently apply there. It’s important that we familiarise ourselves with the different duty and tariff rates.”

It’s also paid off for the firm to carry out testing reports before shipping to ensure the dolls meet the regulations of the different territories Arklu is importing into. “By using a testing agency and testing for every separate requirement all at the same time, you can reduce your check costs by about a third. That’s significant when you spend €60,000 a year on testing,” he states.

According to John O’Loughlin, partner, global trade and customs, at PwC, Irish firms are increasingly looking to low-cost economies in Asia and the Americas to stoke growth.

“We’ve seen a steady increase in the number of Irish companies looking at low-cost production and labour in those markets,” O’Loughlin states. “Not in the food and agricultural sector – in the EU, we’re self-sufficient – but certainly industrial products and toys.”

But while cost reduction is a clear focus, the act of importing itself can impact on cash flow and margins. So what are the key costs?

Duty and VAT

According to the Revenue, if you’re buying goods from outside the EU, you may have to pay customs duty, excise duty and VAT.

The value on which customs duty is calculated is the cost of the goods plus transport, and any insurance and handling charges. The rate of customs duty that applies depends on the goods you import.

VAT is payable on goods at the rate that would apply if they were bought in Ireland. An anti-dumping duty and countervailing duty can also be applied to certain goods to prevent cheap imports from countries with lower material and labour costs damaging EU industry. Payment of the above must be made before the goods are released.

A business can mitigate these costs by applying for an inward process authorisation, which will allow relief from customs duty and import VAT on goods from outside the EU to be processed, and then exported outside the EU, or released for free circulation within the EU.

A customs or bonded warehouse can also help cash flow for businesses that import materials in bulk or hold goods. They can be stored without paying customs duty and VAT upfront. However, once goods leave the warehouse, duty must be paid.

When it comes to buying and importing from the EU, customs duty is not payable. If you are VAT registered in Ireland, you can typically buy goods from another EU business VAT-free. The goods have to be for the purpose of your business and must be added to your VAT return.


“Foreign exchange is one of the biggest areas ignored by importers. They really take a risk with it and try and second-guess the market” 

Gerard O’Reilly, Partner, Corporate Finance, Crowe


Port inspection fees

Importers also need to be aware of other costs, such as port inspection fees for certain foodstuffs to ensure they’re suitable for import and not damaging to the environment or to health.

An import agent or customs broker can help an SME understand the compliance around this and other customs clearance processes but will charge a fee.

Transporting costs

Transporting goods from abroad is another cost where importers can be landed with a hefty bill if their supplier – based, say, in China or India – books a long, slow and expensive route to Ireland. Going to a freight forwarder who will manage and maintain control and transparency of the transport can reduce costs and delays.

“We use a couple of freight forwarders who carry out quotes with the shippers. They do everything from picking the goods up from the factory right through to getting it on board, clearing it through customs and delivering to the warehouse,” says Harkin. “They take away quite a bit of the pain.”

Fluctuating currency values

Another potential cost is fluctuating currency values. Invoices declared in currencies other than the euro must be converted back to it to assess the amount of import duty due.

“Foreign exchange is one of the biggest areas ignored by importers. They really take a risk with it and try and second-guess the market,” says Gerard O’Reilly, corporate finance partner at accountancy and business advisory firm Crowe. “We had a client who lost thousands after the Brexit referendum when sterling plunged and he didn’t know anything about it. He hadn’t realised the implications.”

One solution to this is forward fixed contracts, where the price for buying imports will be set for 12 or 18 months ahead to avoid uncertainty around rate movements.

Recommended Reading: Embarking On International Business

The impact of Brexit

O’Reilly also warns of the potential cost of Brexit on importers’ cash flow. “Importing from the UK may mean paying VAT and customs duty. It may also mean having to spend more on warehousing goods because of the threat of increased border and port delays,” he says.

O’Loughlin of PwC adds: “Paying customs duty of up to 14% on industrial products and upfront VAT from the UK may be quite problematic for the cash flow and working capital of SMEs. They will also have to lodge more regular customs declarations – at a cost each time. Delays at ports, increased driver costs and meeting your service level agreements with your customers all need to be factored in.”

However, he believes Ireland will continue to rely on UK imports even if there’s a hard Brexit.

“You’ll still have the duty on those shipments from the Far East as well. So, the question then will be: ‘Is the cost of goods cheaper in the Far East and are those goods available in sufficient quality?’

“Firms are not as nimble or flexible as you might think in changing their supply chains,” he adds. “You need to work out your Brexit exposure. Where are goods coming from and where are they going to? You also need to negotiate with customs brokers over rates rather than just accepting their costs.”

Recommended reading: Knowing Your Supply Chains and Being Prepared are Key for Brexit

By David Craik

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