Import and export are key activities for many businesses in our well connected global economy.
International shipping is paving the way to greater business opportunities around the world for veterans, but may also seem daunting to startups or anyone that is gearing up for new markets.
The process, regulation and paperwork involved in international trade may seem different from country to country, it would thus be of crucial importance for trader to be both a wise buyer, and a smart shipper.
This article covers the basics from commonly overlooked factors in international shipping arrangement about what it is, how it is done, who is facilitating the process and how to make it work in the best interest of shipper;
1. What is international shipping?
Literally, it refers to the movement of consignment/freight that passes the border and customs area from one country to another, and such movement requires both transportation coordination (land/air/sea) and customs clearance.
However, since EU member countries are under one unifying customs union, imported goods cleared at any point of entry could be freely circulated within EU community; or to file a T1 transit at the point of entry for temporary movement and eventually cleared at the country of delivery before free circulation.
It would be important to note that export from China to HK/Macao/Taiwan requires formal customs clearance due to customs regulation.
2. How it is done
International shipping kicks in as soon as goods are ready at seller/manufacturer premises, arrangement is made in accordance with incoterm agreed between seller and buyer, which includes but not limit to;
Pickup
Storage
Consolidation
Rate inquiry and comparison
Booking and confirming space with shipping carrier
Preparation of shipping and export documents for export customs clearance
Dispatch shipping Bill of lading
Alert shipping arrival
Preparation of import customs clearance
Delivery at destination
Container shipping is the most economy way in international shipping for large volume but requires extensive coordination with different supplier in trucking, warehousing, customs brokerage, and shipping carrier etc.
Air shipping is quick and efficient, less paperwork compared to ocean shipping
Express service (DHL/Fedex/UPS) is quick and delivery to the hand of receiver, but expensive.
E-packet is prevailing shipping method for small parcel as it is serviced by Post office in respective country, very good coverage but slow delivery lead time
3. Who is facilitating the process?
For both Air and Ocean shipping, unless the receiver is able to travel from time to time between cargo origin and destination and to coordinate with each and every single supplier (not wise or efficient though), working with a cargo agent or freight forwarder is a better way to facilitate the process.
A freight forwarder works as the intermediary between a shipper and multiple service provider such as trucking companies, shipping carriers, customs broker etc, and work to the best interest of shipper.
Freight forwarder makes import and export easier, as it is stated on export.gov
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To comply with export documentation and shipping requirements, many exporters utilize a freight forwarder to act as their shipping agent. The forwarder advises and assists clients on how to move goods most efficiently from one destination to another. A forwarder’s extensive knowledge of documentation requirements, regulations, transportation costs and banking practices can ease the exporting process for many companies.
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To cope with complexity in international shipping and opportunities in international trading business, a well-established freight forwarder in any country is normally having an extensive network to offer worldwide shipping solution.
Here is how the collaborative operation process looks like;
4. How to get better rate and service
Having FOB been a popular trading term that shipping arrangement is decided by the buyer at the receiving end, it is convenient for buyer to look up forwarder contact from yellow page and make a call for shipping solution.
One thing to be noted, unless the very forwarder is DHL/ Kuehne-Nagel/DB Schenker or any international one of the likes who have owned setup around the global, they will have to work with another local forwarder from their network at cargo origin.
Due to the fact that most of the shipping process are coordinated at cargo origin, a reliable local forwarder is as important as the one at the destination. It will be a pragmatic approach to cross check and compare the offerings from freight forwarders in both cargo origin and destination.
Sometimes, there might even be advantage in working directly with a local forwarder at origin.
Shipping rates:
International freight transportation market is becoming volatile due to over capacity supply (container shipping in particular), when ocean carriers face last minute booking short-fall in one POL (port of loading), competitive spot rates for the same sailing will be available for next port of loading. Carrier always need to fill empty slot and once spot rate is circulated, local freight forwarders at origin are normally the first one to be informed.
Carrier space:
Same in any container shipping line, space is allocated to respective POL well before accepting booking. When export volume surges and space gets tight, carrier will have to roll the excess part to next sailings.
When rolling happens, priority will be given to the customers that are either paying higher freight rate, or paying freight rate to carrier’s origin office. That being said, working with a local freight forwarder at origin gives shipper an “untold” advantage in peak export season (very few shippers are aware of this).
Local operation:
No one knows an area better than the locals.
China is a big country and export arrangement in North, Central and South China are different from one area to another, a local freight forwarder knows better solution in following perspectives;
Low cost pre-carriage option to choose from, i.e. trucking, barge or rail
The selection of export gateway, i.e. Chiwan/Shekou/Yantian/Dachan Bay all serve the term “FOB Shenzhen”, where there might be difference in carrier equipment supply and customs formalities
Customs clearance and HS code clarification
5. International business opportunities
International trading is evolving quickly and one trader in any part of the world who sources from China, will not be necessarily selling only in their home country. Either through Triangular trade or ecommerce online selling, a trader could possibility source from China and sell to any part of the world.
Working with a local freight forward at the cargo origin will ensure a direct and efficient communication along with competitive shipping cost.
Finally, to traders and buyers around the world who source from China, we encourage you to cross check and compare the offerings from freight forwarder closed to your office or your city, with the offerings from those physically operate in China (hopefully us!). Doing so shall provide the insight into the areas that are commonly overlooked and improve the confidence in international fulfillment.