Guide to shopping for electronics on the grey market: do's, don'ts, and is it even legal?

23 November 2018
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Tempted to buy that latest iPhone in the US or a similar, cheaper model from China? Then read our guide to the pros and cons, so you don’t pay out for a dud deal or get stung by sky-high import taxes

If you fancy a high-spec smartphone for the price of a cheap Nokia, buying a device straight from China could be the answer. Websites such as The Solution Shop, GeekBuying and GearBest sell top-of-the-range gadgets at much cheaper prices than you can find in the UK. But is it safe to buy from these sites?

These websites – and plenty of sellers on eBay and Amazon – operate within the ‘grey market’.

The grey market allows consumers in the UK to buy products outside of the manufacturer’s normal distribution channels and at the lower prices typically paid overseas. Products may be from the same brands we see for sale in the UK, or from foreign companies without a presence in the UK. The grey market isn’t illegal and, in theory at least, the goods are genuine.

The grey market isn’t illegal and, in theory, goods are genuine

“One of the key advantages of buying grey market goods is obviously the lower prices, but another is availability of goods that consumers may not otherwise have access to, such as the large range of high-price-to-performance phones available from Chinese manufacturers at the moment,” says Ben Prater, founder of The Solution Shop.

Xiaomi is China’s largest smartphone company and sells high-spec phones, smartwatches, laptops and tablets at seemingly bargain prices – but not direct to UK consumers. Xiaomi’s Mi 8 has been described as an “iPhone X clone” in tech circles, but costs less than half the price. A Xiaomi Mi 8 (6GB + 128GB) costs £370 at The Solution Shop, while an iPhone X will set you back at least £999 if you buy it in the UK. Unlike most grey market sites, The Solution Shop pre-pays shipping costs and taxes.

Customs


If you buy from rival GearBest, being up to date on import rules is down to you. GearBest.com states: “The prices do not include import tax and duties, should your package become examined and deemed taxable by your local customs. Payment of these is the responsibility of the buyer.”

Whether any parcel from abroad will be picked up by UK customs is pot luck. Legally, UK residents buying something worth more than £135 from an overseas website should pay import duty of 2.5%, plus VAT of 20%. When your parcel arrives in the UK, you’ll be contacted by Royal Mail or the courier company explaining how to pay.

But it’s not just tax and customs you need to worry about when buying electricals from abroad. Will your purchase even work in the UK?

James Barron, mobile expert at Comparemymobile.com, says it’s vital to do your research.

“You need to check the device is compatible for UK use – from connectivity to the type of charger you will need. You also need to consider what happens if anything was to go wrong with the phone – would your warranty be valid?” he asks.

“You’ll need to check the device is designed for UK use”

“If you have aspirations for any kind of smart home, then you might want to look at what handset is compatible with the infrastructure you want to build to ensure you are future-proof, and the apps you rely on are available on the operating service,” he adds.

Arguably, while you might have heard of some of the popular Chinese brands, you are taking more of a risk if you buy a phone from a company you’ve never heard of. If it is an Android phone, you need to check which version of Android it runs and whether it will receive platform and security updates. Will you be able to get Google services such as Play Store on the device? Can you be sure dodgy firmware won’t be collecting your data?

Buying on the grey market doesn’t always mean buying foreign brands. In some cases, you can buy the same brands available in the UK, but at much cheaper prices. For example, the Nikon D810 Digital SLR costs £1,999 at Jessops but China-based AliExpress is selling the same camera for £1,431 (US$1,860) with free shipping. Buyers are responsible for VAT and customs charges – but even when you add on VAT at 20% and import duty at 2.5%, the AliExpress deal still works out £230 cheaper than Jessops.

But Pete Duncombe, commercial director at Jessops, warns there could be significant issues for any customers buying grey imports.

“Many manufacturers will not honour any form of warranty and, more often than not, there will be non-UK accessories in the box. We are also well aware of grey goods ‘going missing’ or being ‘damaged in transit’. In most cases, the overseas vendor will show little or no interest in helping resolve the situation,” he says.

Mr Duncombe’s fears are echoed by Helen Dewdney, founder of Thecomplainingcow.co.uk and author of How to Complain: The Essential Consumer Guide to Getting the Refunds, Redress and Results. She warns that consumers won’t be covered by the Consumer Rights Act or similar EU laws if they buy from a retailer outside the EU.

“Using a credit card for items over £100 may help as you could be able to get a refund through Section 75A of the Consumer Credit Act,” she says.

“Paying by PayPal will help for three months from purchase, but, in general, you are taking a risk. Even if the company will refund you, you will have to return the item at a cost to you, which would not be the case in the UK.”

Package


Bargain-hunting eBay and Amazon fans should always compare local prices with those offered by overseas sellers, and factor in shipping costs. Although there are decent deals to be found, don’t assume these marketplaces will be cheaper, or accessible. For example, even though an Echo Plus speaker costs $149.99 (£115) on Amazon’s US site, versus the £139.99 price tag on Amazon.co.uk, it can’t be shipped to the UK.

Of course, holidaymakers can buy electronics in person and then bring them home. But don’t get carried away by a cheap price tag – you need to compare prices taking into account any sales tax (applicable in most US states), customs duty and VAT.

When the iPhone X was unveiled last year, a 256GB model cost £1,149 in the UK but only $1,149 – about £882 – in the US. Some news outlets claimed it was cheaper to fly to the US to buy the new model rather than buy it here. But once you add on various taxes, plus flight and accommodation costs, these claims don’t quite add up.

Don’t get excited by the price, as you’ll pay customs duty and VAT too

Sales tax varies from state to state but assuming you bought the iPhone in New Jersey, it would be 7%, pushing the US price up to $1,229 (£943).

You can import personal goods worth up to £390 into the UK without paying duty. But for anything costing between £390 and £630 you have to pay customs duty of 2.5% on its total value (not just the proportion above £390). If the item is worth more than £630, you’ll need to call the VAT, customs and excise helpline to find out the tax rate. On top of customs duty, you’ll also need to pay import VAT of 20%.

Assuming customs duty of 2.5%, these fees would add $259 (£199) to the cost of the US iPhone X, bringing the total cost to $1,488. That’s about £1,141, so just £8 cheaper than the UK price. This means it might be worth buying an iPhone if you happen to be on holiday in the US, but it’s not worth making a trip with the sole purpose of buying one.

There is always the option not to declare your purchase at UK customs but that’s risky – it’s illegal and there are harsh penalties for smuggling goods into the country.

“I chose a seller with plenty of good feedback”

Richi Jennings

Richi Jennings (pictured left), 52, is a freelance editor from Hampshire. In January 2018, he wanted to buy a phone that was part of the Android One program – but these phones weren’t available in the UK at the time. So he headed to eBay and bought a Xiaomi Mi A1 for £179, including delivery. The Mi A1 is a mid-to-high-end phone with 64GB storage, 4GB RAM and a full-HD LTPS screen.

“I didn’t want to worry about import duty uncertainties, so I chose a seller that had stock already in Europe – Ireland, if I remember correctly. Obviously, I chose a seller with good eBay reputation and plenty of feedback selling these items,” says Richi. “I also chose a vendor that confirmed it had the Hong Kong variant in stock – this has a wider selection of 4G LTE bands for compatibility with the UK and for when I roam in the US. Hong Kong versions usually come with a three-pin plug, so there is no need to use adapters.”

At the time, the most comparable phone on sale in the UK was the Google Pixel 2, which retailed at £629, so Richi saved about £450 buying from abroad. However, as a technology expert, he knew what to look for when buying on the grey market.

“There’s always added risk when straying beyond the high street. I wouldn’t venture into AliExpress or GearBest for a bigger-ticket item like this, especially if you’re likely to get burnt by extra customs fees. eBay is, in theory, a safer option, but as always with eBay, it’s your responsibility to research who it is you’re buying from. I’m fairly cynical about the eBay/PayPal buyer guarantee, but you should have a fallback of disputing the transaction with your credit card provider,” he says.

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