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logistics of exporting from China — air and sea

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The logistics of exporting from China — air and sea

Posted: March 16, 2016

By Renaud Anjoran

This
is a follow up on our previous article entitled How
to Send Small Quantities & Samples In and Out of China,
based on my colleague Fabien’s experience.

This
time we are writing about the best way to send substantial quantities of
products (over 100 kg) out of mainland China.

1.
Air freight

For
packages of more than 100-200 kg, sending by cargo planes that are run on a
regular schedule by commercial airlines is more economical than using courier
services (DHL, FedEx, UPS, or TNT). The process of air freight is actually very
similar to that of sea freight (see section 2 below) — it is a little simpler
and of course much faster.

Just
like with sea freight, the goods need to be delivered to the airport.
Transportation must be organized from the destination airport to the final
warehouse(s) — to save money, some importers rent a truck to pick up the goods
at the airport. (In any case, a broker is needed for customs
clearance.)

2.
Sea freight

This
is the most complicated, yet the most economical way of sending a large shipment
of goods (beyond 2 or 3 pallets). Experience matters a great deal, and a lot of
money can be wasted here.

Many
people think that this service is very standardized and all freight forwarders
are equivalent. This is not the case! Some are 50% more expensive than others.
(I wrote before about your 4 options for managing
shipping and Customs issues.)

Sea
freight can be divided in three stages for the sake of our analysis.

2.1
From factory to port (EXW to FOB)

In
most cases it is advisable to let the factory arrange this for a few hundred
dollars extra. It will save the importer a lot of hassle and costs. (To do this,
ask your suppliers for a price based on the FOB incoterm rather than
EXW.)

This
stage includes truck fees to the port, customs clearance and ship loading, along
with some extra paperwork and fees. The price does not increase much with higher
volumes, which is why many importers try to ship full containers.

2.2
From port to port (FOB to CIF)

This
is the real ‘shipping’ cost. It is based on volume mostly. The price to the US
can vary from 30 to 100 USD per cubic meter, depending on the time of the year
and the provider. This component of the price can usually be
negotiated.

Insurance
is also included in this stage — on average it is 0.3% of the commercial value
that was declared.

2.3
From port to final destination (CIF to DDU or DAP)

This
stage includes taking the goods from the ship to your door, including paperwork,
customs clearance, and “last mile” trucking.

Different
freight forwarders will quote vastly different prices — some will be up to 4
times more expensive than others! One reason for those differences is that most
providers subcontract this stage to a local provider that, often, they don’t
know.

Will
you want to use the same provider for the complete shipment (door to door)? It
is more convenient… But will never hassle free unless an experienced team is
working on this for you. In contrast, finding a broker and a shipper locally
will usually save you money but might make coordination more
complicated.

Another
way to cut costs is to find an international freight forwarder that is
particularly dedicated to a certain zone (e.g. US west coast). However, they
might be hard to find, depending on your area.

Finally,
this stage holds the highest number of surprises in store — expect problems with
the bill of lading, the bonded number, and customs clearance.

2.4
Anything else you should worry about?

Yes!
Chinese logistics providers are among the most creative when it comes to finding
a reason to raise their prices. Here is a list of common reasons for bumping up
the price:

•
“The shipping company (the boat/airplane owner) just increased their price after
we gave you a quotation, and you just shipped the goods to the port”;

•
“You need to pay duty tax in advance” (they apply the worst case tax before they
know how much that tax will be);

•
“The packaging volume or weight is higher than initial estimate” (their data are
up to 20% higher than what you measured);

•
“There are special services for batteries, lighters, scissors and other
‘dangerous goods'”;

•
“There is also a fee for XYZ” (it was mentioned in the fine print on the back of
the quotation).

Should
you expect transparency from logistics providers? Unfortunately, this is not
realistic — their margin depends on lack of knowledge from their clients. This
is the same as asking a manufacturer to give you a detailed breakdown of their
costs.

Experienced
shippers tend to confirm everything in advance with freight forwarders, in order
to avoid last-minute surprises. But, unless you are a large buyer, providers
generally won’t behave ethically and you might have to switch to a new provider
after a few months/years.

Larger
freight forwarders generally request more paperwork and have more complex
processes than their smaller competitors, who often have poor or no English
capabilities… Remember, poor communication might lead to further
issues.

As
always in China, dealing with suppliers (including service providers) is much
easier if you work in a large and famous company.

[Note:
not all logistics companies based in China are unethical — we are simply writing
that the vast majority of them resort to tricks to “hook” a client and then
extract more money over the length of the relationship. This is something
importers should know.]

3.
A few extra notes about the logistics of exporting from China

Most
companies (manufacturers, trading companies, and freight forwarders) in China
have no export
license,
and yet handle the export process. Some companies do have that license and
“rent” it out to others. This is fully legal but adds one more link in your
supply chain — and one more element that might fail (resulting in delays or
disclosure of confidential information).

When
the license is “rented out”, the license owner gets a VAT
refund
(up to 17% of your goods commercial value) from the goods’ clearance. Note that,
as the importer, you will not know the value that was declared to Chinese
customs. It is hidden in the process. It is not necessarily the same as the
value of the invoice you received.

Renaud
Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006.
In addition, a passion for improving the way people work has pushed him to
launch a consultancy to improve factories and a web application to manage the
purchasing process. He writes advice for importers on
qualityinspection.org.

Want
to know how to work with factories to produce your unique products? Join
the Smart China Sourcing Summit to learn sourcing best practices, April
17-19, 2016. Co-located with Global Sources 3,000-booth trade show in
Hong Kong. Learn more at http://www.GlobalSources.com/summit

Keep
updated on sourcing best practices and the Summit. Join the Smart China
Sourcing Facebook group at http://www.facebook.com/groups/SmartChinaSourcing

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