Import to denmark/Approvals, Duties & Quotas

Before opting into importing goods from abroad you must clarify whetheryou need special approvals to import the goods or whether the goods aresubject to excise duty, duty, or quotas.Commodity code
Each individual commodity in Denmark has acommodity code. Commodity codes are available from Told & Skat. Toobtain the correct commodity code you must know in detail allcomponents and functions of the commodity in question.
In case ofdistinction between two or more classifications you must be aware thatrates of duty vary. One design may classify a commodity as a luxuryproduct while another design may classify the same commodity as astaple product.
On registration as importer you must state whichcommodities you plan to import. Usually, you will then get the relevantcommodity codes.

Approvals
If you carry out intra-EUtrade there are no import restrictions as the EU is considered onesingle market. If a product is approved in one EU state this approvalis likely to apply throughout EU.
However, exceptions existnecessitating approval prior to imports - primarily within foods,pharmaceuticals, and certain types of chemicals (skin care products,herbicides, additives for feedstuffs and foods just to mention a few).

Themain principle, if you carry out extra-EU trade, is that you needapproval before you begin to import e.g. new foods, electronics, ortoys.
Thus, you should consult Told & Skat before you begin importing as such approvals may take some time to get.

Excise duty
Regardlesscountry of origin, excise duty may be imposed on a commodity. Exciseduty implies that the Danish central government has decided thatcertain products are subject to special duty. At present, mainlyenvironmentally damaging and energy-intensive products are subject toexcise duty. Such products include NiCd batteries, plastic bags,pesticides, throwaway cups and plates as well as coffee, chocolate, andtea.
Identify the product´s commodity code and check if it appears on Told & Skat´s list of commodities subject to excise duty.

Duty
Withinthe EU there are no collection of duties between the member states.Duty only applies to third countries. Duty on international tradedecreases, but a number of commodities are still subject to duty.
Identify the product´s commodity code and check if it appears on Told & Skat´s list of commodities subject to duty.

Quotas
Finally,quotas may be established, regulating the annual quantities of aspecific product imported into Denmark. Quotas only apply to thirdcountry imports.
Quotas are established to protect European industry and agriculture.
E.g.textile quotas have been established to protect the clothing industryand sugar quotas to protect the Danish sugar production.
Identifythe product´s commodity code and check if it appears on Told &Skat´s list of commodities subject to quota restrictions.

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Selling your products or services you should remember to state clearly on which terms you want your customer to pay.Should I grant credit?
Whether to grant credit, and the termof such credit, depends on your agreement with the customer and, tosome extent, on trade customs. Many companies grant a 30 days´ creditor "invoice month + 30 days". Sometimes, credit is a competitiveparameter similar to e.g. price.

Bear in mind, however, that thelonger credit you grant the greater the risk of ending up with nopayment at all. There is always an element of risk connected togranting credit.

Net cash
If you do not have aspecific agreement with your customer it is often an adequate measureto state "net cash" or "net 8 days" on your invoice thus signallingthat you do not generally grant credit.
You can state a due date - e.g. 25 April - if it is 14 days ahead. This way your customer knows exactly when to pay.

Youcan also choose to just await the customer´s settling of the invoicenot requesting payment until after a month´s non-payment.
Even ifyou by doing so risk granting a month´s credit, you avoid precludingyourself from requesting payment until a due date stated on the invoicehas been exceeded considerably (e.g. net 30 days exceeded by 2 weeks =1½ months´ credit).

Request payment as soom as possible
Ifyou have stated an 8 days´ credit and the customer still has not paidafter 30 days you should not hesitate to request payment after 30 days,or earlier, if it seems reasonable.

Requesting payment can bedone by means of phone, letter or in another way. This is entirely upto you and is mostly a practical matter.

Addition of interest
You can charge interest on overdue payment. Most accounting programs are able to do this automatically.

Thereare rules of law stipulating the limit of such interest, however, theserules are of insignificant importance. No matter the interest charged -having received a reminder, most customers choose to pay the originalamount. But if a reminder with an interest charge is all it takes tomake people settle their original debt, then never mind the interest.


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Prior to starting up an import business there are a number of issues toconsider before you rush out and import a container full of goods.Is there a demand for the product?
Primarily, you must be ascertain as possible that there is in fact a market for the product/syou want to import. Who are the customers? Are they going to fancy theproduct? Is the price competitive?
The best way to determine whetherthere is a market for the products is to ask as many potentialcustomers as possible. If enough customers OK the product, the priceand the delivery and payment terms, you are on the right track.

Who are your competitors?
Dependingon which products you want to import it can be more or less difficultto determine whether you will survive in the market.
If you wantto search for potential competitors you can use www.krak.dk orwww.degulesider.dk. Search for "fodtøj" + "hele landet" if you plan toimport footwear. You will get hits on companies and persons in thefootwear industry.

If you plan to sell to retailers you need tofind out if stores are individual or links in a chain. If a store is alink in a chain it is impossible to sell direct. Instead you mustapproach the head quarters of the chain.

Registration at WebReg.dk
Extra-EUtrade - including Greenland and the Faroes - entails registration asimporter. You do so by ticking off the "importørregistrering" box onthe registration form. If your business is already registered, all youhave to do is request additional registr ation as importer/exporter.

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International trade is subject to compliance with several rules.Input tax on intra-EU trade
If you import goods from aVAT-registered company within the EU, the invoice will not include VATif you have informed your CVR (VAT) number.

You must, however,calculate a 25% so-called acquisition VAT on the invoice amount. Youmust include the acquisition VAT in your output tax when settling theVAT, but the acquisition VAT is deductible just like input tax on goodspurchased from a Danish company. Thus, your cost price - other thingsbeing equal - remains the same whether you purchase the goods inDenmark or in another EU state.

Output tax on intra-EU trade
Ifyou sell goods to a VAT registered company within the EU you do nothave to add VAT if you get the customer´s CVR (VAT) number and thegoods are physically leaving the country.
In box B on the VATreturn sheet you must state you total sales and provide SKAT with aseparate list specifying total sales to each customer.

Note, bythe way, that you are liable for the VAT settlement, should it turn outthat the foreign company is not VAT-registered after all.

If yousell to private consumers in another EU state you must add Danish VATjust like when selling to Danish consumers. Furthermore, you mustreturn quarterly statements to SKAT.

Extra-EU purchasing
If you buy goods from extra-EU countries you must be registered as importer at SKAT.

Insome cases you must pay duty and excise duty on commodities purchasedin extra-EU countries. The duty, calculated from the dutiable value -i.e. the invoice amount + freight, is deductible in you tax accountsunder operating costs.

You must, however, calculate a 25%so-called acquisition VAT on the dutiable value. This VAT is deductiblesimilar to input tax on goods purchased from Danish companies.

Oncein Denmark, the goods must be cleared through customs within 14 days.Thus, you must fill in an EU single administrative document and hand itin to the local customs authorities along with a copy of the invoiceand waybill.

Extra-EU sales
If you sell goods toextra-EU countries you must be registered as exporter at SKAT. Prior toexportation the shipment must be inspected by the local customsauthorities.

You do not have to add VAT to the invoice if youcan verify that the goods have been dispatched to an extra-EU country.Such documentation could be your copy of the EU single administrativedocument, DSB´s or the postal services´ receipt or if it is stated onyour invoice, bank statement, etc. that the goods have been exported toan extra-EU customer.

Services
Generally, if you buyservices - i.e. non-physical objects - abroad, you must calculate andsettle VAT based on its value. Oppositely, you do not generally have tocalculate or add VAT on services sold abroad.

SKAT /Thomsen
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Once bought, your goods need to be transported, cleared throughcustoms, and stored. This chain of actions holds a number of pitfalls.Delivery terms
If you are a distributor, freight is typically subject to agreement between you and your supplier.
Ifyou are a wholesaler you are in a better position to determine thedelivery terms. Often, however, prices are quoted based on fixeddelivery terms, e.g. "ex works" (delivery right outside the factory)where it is up to you to make arrangements for the furthertransportation.
If the price quoted is "franco", it indicates that the goods are delivered at your doorstep.

Thereare many combinations of such internationally recognised terms, allgathered under one: INCOTERMS. Ideally, you should be able to size upwhich INCOTERM to choose for the allocation of costs between you andyour supplier, as you will otherwise risk to not include the totalfreight in your price calculation.
Learn more about INCOTERMS on www.transportforsikring.dk

Shipping agent
Takinggoods home, it is wise to ally yourself with a shipping agencyspecialised in the field. A shipping agency handles all paperwork aswell as the transport. The agency knows the best transport solutions inthe area and is a useful assistant to your supplier´s shipping agent,especially if your supplier has no experience in exports.

Theagency helps you if you e.g. import perishable goods from Greece andcontention breaks out between Serbia and Croatia causing your shipmentto perish due to a week´s delay. In such cases a shipping agency hasalternative channels to use and may also have encouraged you to takeout a special transport insurance.

Charterer
Alternatively,you can use a charterer, who is usually solely a haulier, but for thesake of good order you should check if s/he collaborates with ashipping agency and if s/he is adequately insured. Note, by the way:Even though the charterer may be adequately insured s/he is not,pursuant to existing legislation, allowed to insure against the fullrisk. Therefore, you must insure against the remaining risk yourself.

EU single administrative document
Oncein Denmark, the goods must be cleared through customs within 14 days.Thus, you must fill in an EU single administrative document and hand itin to the local customs authorities along with a copy of the invoiceand waybill. This is a time killer, so it is a good idea to have yourshipping agency handle this.

Duty free warehouse and stock hotel
Whenyour goods arrive in Denmark you can store them in a duty freewarehouse, meaning that you postpone the customs declaration until youhave sold the goods.
This is an economic advantage if the goodsare burdened with heavy duty. Several shipping agencies offer thissolution including stock hotel.

A stock hotel typicallyhandles clearance through customs and distribution to your customers -against payment, of course. A stock hotel is a handy way of securingyour customers delivery on time especially in the beginning when yourbusiness is small and it is hard to take care of everything yourself.

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You can organise your import business in several ways - e.g. as atrading company, an agency, a distributor or as a subsidiary of aforeign company.Trading company
Typically, a trading company is a hybrid ofthe above. You can be a distributor, a wholesaler and an agency at thesame time. You often see several sub-labels under a trading companytargeting diverse segments.

Agency
As an agency youact on behalf of your supplier. You are their local salesperson,carrying out business in your own name and on you own account. You workon a commission basis and costs of marketing and promotion are subjectto agreement.
Goods are dispatched directly from the supplier tothe customer and you receive a copy of the invoice. Usually, an agencyonly handles sales and complaints.

An agency business istypically home to a number of related agencies. Such as elastics,buttons, snap fasteners, velcro, zippers, etc. You should limit yourrange of agencies to approx. 10 as you will otherwise not be able topromote each product sufficiently.

Agencies are well-protected within EU legislation, but outside EU legal rights are scarce.
Usea standard agreement which you can buy from Danmarks Agentforening(association of commercial agents of Denmark) or study the guidelinesfor agency agreement on www.cvu.dk.

An agreement should coverall terms including time of settlement of commission, who paystravelling expenses in connection with fair attendance, level oftraining you are entitled to, etc.

An agency agreement is terminable on breach e.g. when:

• Youfail to meet the promised sales or your driving licence is suspendedleaving you unable to carry out trade visits for a period of 6 months
• Your supplier does not pay the promised commission or s/he does not provide the agreed promotional material

Distributor
Adistributor appears as being similar to an agency, however, as adistributor you keep stocks on your own risk and account, but under amore or less visible concept.

Some distributors work undertheir supplier´s brand - typically within the car industry - whileothers are characterised by the products they distribute. Such beingagricultural machinery and various types of processing equipment.

Noparticular legal protection applies to distributors. So if you baseyour business on relatively few suppliers it is even more important toenter into legally binding agreements with them. Such agreements arenot always easy to put in place, and it may be tempting to beginwithout.

If a supplier after a couple of years prefers anotherdistributor to you, s/he can simply transfer the agency unless you haveentered into a legally binding agreement. This obviously goes both waysand you are thus free to change supplier - depending on the contractualbasis you have agreed upon.

Subsidiary
If you set upbusiness as co-owner of a subsidiary of a foreign company, you mustobserve relevant legislation and taxation rules applying to thisbusiness format. Check out Erhvervs- og Selskabsstyrelsen´s (The DanishCommerce and Companies Agency) website (www.eogs.dk), where you canfind ”Vejledning for filialer af udenlandske selskaber i Danmark”(guidelines for Danish subsidiaries of foreign companies).

Inthis context a subsidiary is typically a sales and service officeestablished on the parent company´s considering it necessary to bepresent in the market rather than just being represented through anagency or a distributor.

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Often, an importer is so focused on the product that s/he forgets tocheck out the supplier. Focussing on the product alone can be fatal.Two real-life examples

• Example 1
  A foreignentrepreneur residing in Denmark had found some good products in hisnative country through a cousin of his who he had great trust andconfidence in. Only problem: When the goods arrived in Denmark - paidby letter of credit - it contained nothing but stones and oldnewspapers. In the eyes of his cousin, apparently, the entrepreneur hadbecome a rich man, making it OK to cheat him.
• Example 2
  Anotherexample is about a man who tried to import wooden floor planks fromLatvia. He was in a partnership with a Latvian, each owning half ofeach other´s companies in Denmark and Latvia, respectively. Being inclose relationship with a Latvian business partner he obviously did notanticipate fraud.
  Nevertheless, a truckload of expensive 5 m floorplanks arrived - however, they were supposed to be 6 m. Moreover, theplanks were not completely dry, so they needed additional seasoning.The batch was sold in advance so it became an expensive business.

Other risks
Youare also exposed to supplier´s bankruptcy or that the factory isdestroyed by fire. Thus, it is wise to use more than one supplier ifyou can.
With a long distance supplier you must remember that you cannot drop by to check out the goods before they are dispatched.

Furthermore,there is a mental difference hidden in unmatching trade customs. Often,trade procedure varies between countries and it does not become anybetter when you also struggle with big differences in culture andmentality.
Danes tend to stick by the saying "a promise is apromise". This is as true as can be, but e.g. in China is it awfullyimpolite to say no. Thus, you may get positive feedback on allproposals - however, this type of "yes" may in fact hide a "no".

In summary
Bearingthe above in mind along with additional practical and cost relatedconsiderations, you must also contemplate the below concerning distance:

Long-distance (sea/air freight)

• Long lead time for delivery, high transport costs
• Cultural differences depending on your native background
• Difficult to control goods´ quality as well as observance of time of delivery
• Usually, pre-payment is required
• Duty is often imposed on Extra-EU trade
• Heavy travelling expenses

Short-distance (road haulage):

• Short lead time for delivery, fewer expenses
• Cultural differences depending on your native background
• Easy control access and long-term trade history
• Payment is governed by trade customs rather than collateral security
• Low travelling expenses

Check out your suppliers
Visitthe company, inspect their production, packaging, and dispatching. Makespecific requirements for the packaging. If you have pre-paid an orderit is very annoying to receive a batch of goods damaged due to wrongpackaging. Such losses can be very hard to get compensated.

Test the chemistry - do you get along?

Checktheir economy, get a credit report from their banker or have a thoroughcredit report worked out by a credit rating agency - or maybe your bankcan help?.

Controller
If you trade over largedistances it is recommended that you use a local controller. Thecontroller inspects the goods before dispatch and makes sure they meetthe contractual requirements.
Controllers are very common in the far East where textile manufacturers soon discovered the advantages of using local agents.
Ifyou are a member of an industry association they will help you out,alternatively, you can consult the local embassy or export officer. Onthe Danish Ministry of Foreign Affairs´ website you can seekinformation on Danish embassies worldwide (www.um.dk ).

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