Importing goods from China is a popular choice for many business owners in Indonesia due to competitive product prices and a wide range of suppliers. However, many importers focus solely on the price of the goods without considering the total cost of importing from China.

Consequently, many are surprised when the goods arrive in Indonesia by the emergence of various additional costs that were not previously accounted for.

So, how do you calculate import costs correctly?

This article outlines the step-by-step process for calculating import costs from China to Indonesia, enabling you to estimate your required capital more accurately and avoid unexpected expenses.

Why Is It Important to Calculate Import Costs Before Purchasing Goods?

As professionals experienced in handling cargo for Indonesia, we often encounter prospective importers who ask:

"If the price of the goods is USD 2,000, then that’s the only capital I need, right?"

The answer is certainly no.

The import process involves several cost components that must be considered from the start, such as: the price of the goods, international shipping costs, insurance, import duties, import taxes, handling and administrative fees, and delivery costs to the final destination. By knowing the estimated costs upfront, you can:

• Determine a more accurate selling price.

• Avoid losses caused by miscalculating capital.

• Better manage business cash flow.

• Choose the most efficient shipping method.

• Components of Import Costs from China to Indonesia

The following are the main components generally included in the calculation of import costs.

1. Price of Goods (FOB)

FOB (Free on Board) refers to the supplier's price for the goods before international shipping costs are added. For example: Product price: USD 2,000. This value serves as the initial basis before calculating other costs.

2. Freight or Shipping Costs

Shipping costs depend on several factors, including:

• Sea or air transport

• Weight of the goods

• Volume (CBM)

• Port of origin

• Port of destination

The larger the volume of goods, the higher the shipping cost. 3. Shipping Insurance

Insurance is not always mandatory but is highly recommended, especially for high-value goods. This cost provides protection against loss or damage during the shipping process.

4. Customs Value (CIF)

When calculating import duties, the government uses the CIF (Cost, Insurance, Freight) basis as the customs value. This means the value of the goods plus insurance and freight costs forms the basis for calculating import levies. (Customs)

The simple formula is: CIF = Price of Goods + Freight + Insurance

5. Import Duty

The import duty amount varies depending on the HS Code of each product. Therefore, two items with the same price do not necessarily incur the same import duty. This tariff rate is what gets multiplied by the customs value (CIF). (Customs)

6. Import Taxes

In addition to import duties, imported goods may also be subject to taxes such as:

Import VAT (PPN Impor)

Import Income Tax Article 22 (PPh Pasal 22 Impor)—subject to applicable regulations

The tax base is calculated based on the import value in accordance with taxation and customs regulations. (Tax Office)

7. Handling and Document Fees

Other common costs include: customs clearance, port handling, storage (if applicable), document administration, and delivery to the warehouse. These components are often overlooked by novice importers.

Example of How to Calculate Import Costs from China

Suppose you purchase goods from China with the following details:

Price of goods: USD 5,000

Freight: USD 600

Insurance: USD 100

Then:

CIF Value

USD 5,000 + USD 600 + USD 100 = USD 5,700

Next, this CIF value serves as the basis for calculating import duty according to the product's HS Code. Once the import duty is determined, VAT and other import levies are calculated in accordance with applicable regulations. The amount of the levies will vary depending on the type of goods, HS Code classification, and the importer's status. (Customs)

That is why two importers purchasing goods of the same value do not necessarily pay the same import costs.

Factors Affecting Import Costs

In addition to the price of the goods, several other factors significantly influence the total import cost.

1. Type of Goods: Each product has an HS Code that determines the import duty rate.

2. Shipping Method: Air freight is faster but generally more expensive than sea freight.

3. Volume of Goods: For sea shipments, costs are usually calculated based on volume (CBM).

4. Value of Goods: The higher the value of the goods, the higher the base amount used to calculate import duties and taxes.

5. Incoterms: Terms such as FOB, CIF, EXW, and DDP involve different allocations of cost responsibilities, thereby affecting the total amount you must pay.