If you are up to date with the import market, you will find that many top companies import their products from China. China is one of the popular manufacturing hubs due to its low labour costs and state-of-art technology. If you too are thinking of importing your products from China, then you might want to research your options carefully, especially on the international shipping cost.
Understanding How Shipping Costs are calculated
If you dive into the import market without doing your homework, you are sure to get swindled by Chinese suppliers when it comes to costs. The shipping costs have jumped up immensely due to the pandemic situation. Do not be surprised if you see a hike in shipping costs in 2022 when compared to 2019.
The most common reasons for such spikes are due to an increase in product demand, and shortages of containers or vehicles to deliver the products. China was one of the first countries to recover from the pandemic and hence was able to ship more products to other countries.
Things might start stabilizing once there are enough containers and vehicles to deliver the products, and when the supply exceeds the product demand.
So, coming back to how shipping costs are calculated, these are based on the below factors:
- Factory to Port Transportation
- China Export Clearance
- Freight Cost
- Document Delivery through international courier services
- Port Charges for the destination
- Customs Bond for US companies
- Domestic Transportation to deliver to the destination address
When your order is complete and products are all set to be shipped, your supplier will arrange for transport to have your products shipped to the port. The cost for this might vary depending on the distance from the warehouse to the port. It is always better to discuss such information with your supplier and have it added to the FOB before signing the contract.
Like in the case of any exports, all goods need to be cleared for exports before they are shipped off to the final destination. Random inspections are conducted by the Chinese authorities to check if all documents are in place. This also gets included in your FOB.
The international shipping cost for freight might vary from one country to another. It all depends on the location and volume of goods that will be shipped. You can either opt for Less Than Container Load (LCL) or Full Container Load (FCL). Now, you might wonder what the difference between the two is
LCL is when you will only be paying for the space used for your cargo. In simple words, your cargo will be shared with other shipments to save on space. Hence, you will be paying lesser costs when compared to FCL.
FCL, on the other hand, refers to you paying the whole cost for the container. This container is exclusively for you, even if you do not have enough goods to fill them up.
Insurance is a crucial part of any import-export business. You do not want to receive damaged goods during transportation and be held liable for the same. Having insurance saves you from such hassles and you can be assured that compensation will be paid by the supplier if the goods get damaged in transit.
Next, you might also need to take into consideration the courier charges, along with the Bill of Lading, Invoices, and other essential documents. Once your shipment arrives at the destination port, you also need to pay the port charges. If you had opted for FCL, then you need to pay the local charges as per the container. In the case of LCL, you will only be paying for the space used by your cargo.
If you are operating from the US and importing your products from China, you need to obtain a customs bond before your cargo arrives at the destination. This is a legal contract between the importer and the US customs officials that the importer had abided by the customs regulations.
Last, but not least is the final delivery of your product to the warehouse. This component solely depends on how your product is transported and the distance from the port to the warehouse.
Like any other person, you too might be interested in knowing how your international shipping cost be reduced when it comes to importing from Chinese suppliers.
You can do so by:
- Opt for FCL and ensure that you combine all your LCL into one FCL container
- Book your containers in advance and plan your volumes as per the container size
- This can be done by asking your Chinese suppliers to design the package as per container size
- Opt for sea transport rather than air transport, if possible
Another way in which you can cut down on your transportation costs would be by opting for DAP or DDU rather than CIF. DAP refers to Delivery-at-place and DDU refers to Delivery Duty Unpaid. These are both incoterms that can be included in the FOB.
Under DAP, the buyer will be liable to pay for all the imports clearance and other costs only after the goods reach the delivery address. DDU on the other hand is where the seller is liable to pay for all the import customs before the product gets delivered to another country.
Getting the Work Done Through Sourcing Agents
If you want to avoid all the hassles involved with the international shipping cost, then you can hire reliable sourcing agents to do the job for you. They will take care of all such details and ensure that your products are shipped on time.
Sourcing agents prove to be extremely beneficial if you are new to the import business. Many Chinese suppliers are not comfortable conversing in English. Professional sourcing agents are fluent in Chinese and can help you negotiate a good deal.
When it comes to paying your sourcing agent, this can be done in three ways:
- One-time fees
- Commission based
- Production based fees
- Flat Fees
Under one-time fees, your sourcing agent will only help you find the right supplier based on your requirements. They will do all the research in terms of verification and hand over the reins to you and get paid for their services
In case of the commission fee structure, the sourcing agent will charge a certain percentage of the total product value.
In a production-based structure, the sourcing agents will do all the groundwork right from finding the suppliers to taking care of the shipment process.
Under the flat fee model, the sourcing agents will charge a flat fee either on a per-product basis or for a stipulated period (month or week).
Knowing how costs are on imported products calculated can help reduce your international shipping cost. Keep in mind the product and the volume and the mode of transport you need to use for shipping to get the right estimate.