The full cost of importing from China

The first question every importer asks is what it will cost to make the product in China. The answer the factory gives is a single number, and it is correct — but it answers a different question. The factory price is what it costs to get the product out of the factory gate, not what it costs to put it on a shelf in Israel. The gap between those two numbers is what decides whether the import is profitable, and it is the main reason a first import so often ends in disappointment.

This article breaks the cost down into its parts. We do not put figures or percentages here, because every one of them changes with the product, the quantity, the season and the exchange rate, and a number written today will be wrong in two months. What does not change is the list of components, and that is what lets you fill in your own numbers.

The formula, in one line

The unit cost on the shelf is made up of the cost of the product itself, plus everything needed to bring it from the factory to you, plus the taxes the state collects on the way, plus your own costs in Israel — all divided by the number of units you actually sell, not the number you ordered.

What exists before the product does

Before the first production run there are one-off costs. They do not appear in the unit price the factory quotes, but they exist, and they spread across the order — which means they add far more to a unit in a small order than in a large one.

• Tooling. A product that needs a dedicated mould carries an initial cost paid once. On a small first order it can be the largest single component of the unit cost.
• Samples. Every round of samples costs money, including the express shipping to get them. Three rounds is normal, not unusual.
• Design and development. Packaging design, preparing files for production, and sometimes changes to the product itself.
• Testing and compliance. Some products require laboratory testing or a regulatory procedure before entry. That is a cost paid once per model.

The cost of the product itself

This is where the number the factory gave you sits, but it is worth confirming what it includes. A factory quote can cover the product alone, or the product packed, or the product packed and already in a marked carton. Those three quotes look alike and can be tens of per cent apart.

• The unit price at the quantity you are actually ordering, not the quantity the quote was based on.
• The inner packaging — box, bag, filler.
• The outer packaging — the carton, and how many units it holds.
• Marking: labels, barcodes, Hebrew labelling.
• The terms of sale: whether the price is from the factory gate, or includes transport to the port of departure.

From the factory to the port in Israel

This part varies more than any other, because it depends on the route, the season and the state of the market. What is constant is that it contains more lines than it appears to.

• Inland transport from the factory to the port of departure in China.
• Handling and documentation at the port of departure.
• The freight itself — sea or air. This is the line everyone looks at, and usually it is not the largest.
• Cargo insurance.
• Destination charges at the port in Israel: unloading, handling, and sometimes storage if clearance is delayed.

What the state collects

Three things are charged on entry, and they are calculated on top of one another rather than in parallel.

1. Customs duty — if it applies to the product. The rate is set by the product's classification in the customs tariff, not by what the product is called in everyday language.
2. Purchase tax — applies to some products only.
3. VAT — calculated on the value after duty and purchase tax, so a high duty rate increases the VAT as well.

To these are added the customs broker's fees and the costs of handling the clearance. One point deserves emphasis: the classification is what drives this whole chain, and it is determined by the Israel Tax Authority, not by the importer or the supplier. Establishing the classification before ordering is one of the most worthwhile things you can do, because it can change whether the project is viable at all.

Your own costs in Israel

Once the goods are cleared, they are still not on the shelf. What remains is usually what separates a profit from working for nothing.

• Transport from the port to the warehouse, and storage.
• Financing: the factory is paid months before the product sells, and that cash flow has a price.
• Losses: defective units, units broken in transit, units that do not sell.
• Returns and customer warranty.
• Marketing and selling — photography, a product page, advertising, platform fees.

How to actually use this

The right way to work with the formula is not to fill it in after the order has been placed, but to build it before looking for a factory. Start from the end: what the product sells for in Israel, what margin you need, and how much that leaves for the unit cost on the shelf. The number you get is your budget, and from it you work backwards to the factory price you need to achieve.

If that calculation shows there is no factory price that can work, that is a good answer arrived at in time. Better to find it on paper than once the container is at sea.