By Fabien Gaussorgues
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.
Any tips/comments are welcome!