How can a shipping agent save you money?

If you ship product from China to the United States you will be familiar with the complications surrounding shipping. As a small business, you might think hiring a shipping agent is unnecessary, too expensive or in the ‘not just yet’ pile.

However, there are some instances in which freight forwarders will be cheaper than regular carriers, like UPS and FedEx. This post details some of those.

1. Bulk Discounts 

It is no secret that freight forwarders offer cheaper space on ocean vessels because they buy space in bulk at a discount and portion it out to their customers. You should think seriously about using a freight forwarder if you are shipping anything on the water regularly.

2. Direct Negotiations with Airlines

Freight forwarders also negotiate directly with commercial airlines such as Delta, KLM and Air China to fill the space they have on commercial flights. They can also secure space on dedicated charter flights for large shipments and oversized equipment.

The rates for air shipment are sold at the exporting airport, meaning the price is determined there. Shipping agents develop relationships with airlines who, in turn, give them lower prices.  

3. Couriers are getting too expensive

Couriers such as UPS and FedEx have the largest shipping volumes and often have their own planes flying the routes from China to the US. You may be wondering why, in that case, their prices are so exorbitant. They are incentivized to keep pricing high because they handle many individual packages. It makes more sense for them to charge 100 customers shipping 1kg packages $30 ($3000) than it does to charge once customer with a 100kg shipment $5 per kg ($500). 

4. You ship more than this amount 

Shipping rates change and the switchover point is not black and white. However, if you are shipping product with a total weight of more than 30kg (around 60lb), you should begin asking a freight forwarder for quotes. If you are shipping product weighing 100g kg or more, a good air freight forwarder will beat the couriers 9 times out of 10. 

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This is a guest post by our shipping guru Joseph Walsh, a licensed Customs Broker and Freight Forwarder who has been offering his clients diverse transportation solutions for over a decade. He specializes in dealing with multiple government agencies such as the FDA, Fish and Wildlife, and US Customs. Services include air freight, ocean freight, import, export, customs clearance, HS Code consulting, domestic trucking, warehousing, and distribution. Joseph can be reached at joseph.walsh@ariesgl.com or 516-209-4517. 

The Importers Checklist

This guest post comes from logistics guru Joseph Walsh of Aries Global Logistics. Here he has put together a helpful checklist of 5 things to know before you import. 

1.    The Terms of Sale: Know Your Responsibilities

FOB, CIF, EXW, DDP

The Terms of Sale document explains what you will pay for and what your supplier will pay for. In it, the most commonly used term is Freight on Board (FOB). Importing your product ‘FOB’ means the factory manages the product through export customs and delivers it to the port or airport in the country of origin. The importer is then responsible for freight, insurance, and customs charges from the port of origin until the product arrives in the United States. Another commonly used term is Ex Works (EXW). Importing your product ‘EXW’ means the importer is responsible for all fees including local pick-up and export customs charges in the country of origin.

2.    HS Codes: Know Your Product

Duty rates and any special clearance charges

Choosing the HS code is the responsibility of the shipper and, at the end of the day, the importer (you) will be responsible if this is not done correctly. The Harmonized Code or HS Code is a 10-digit number that classifies your product and determines how much duty is to be paid on it. If you do not classify it correctly your shipment can be stopped by customs. It is also possible for customs to make a claim against you in future if a product was previously imported under an incorrect HS Code.

3.    Bonds: Know if you can legally import

Is a yearly bond or single entry bond right for you?

In order to import, a company must have a current bond on file with US customs. Think of this as an insurance policy ensuring you will pay the government the duties that are owed. Depending on how often you plan to import you will either need to purchase a single entry bond or a yearly bond.

4.    Documents: Know that you have all your paperwork in order

POA, Commercial invoice, packing list, other (FDA, COA, bank docs, export licenses)

In general, every importation will require a packing list, commercial invoice, and bill of lading. These documents need to be presented at least 48 hours before the shipment leaves the country of origin. Other documents may be required depending on the nature of your product. 

5.    Timing: Know that you can deliver on your promises

Build in time for delays

Begin with your ideal delivery date and work backwards. Can you meet your deadline with ocean freight or will you need to air ship? I have seen more companies get into trouble due to optimistic planning than any other issue. When you are told a product has a transit time of 14 days, it does not mean you will have the product in your warehouse in 14 days. You must allow time for customs clearance, pick-ups, deconsolidation, and countless other things that could pop up. My advice is to speak with your freight forwarder and work together to come up with a schedule that will keep your customers happy.

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Joseph Walsh is Licensed Customs Broker and Freight Forwarder who has been offering his clients diverse transportation solutions for over a decade. He specializes in dealing with multiple government agencies such as the FDA, Fish and Wildlife, and US Customs. Services include air freight, ocean freight, import, export, customs clearance, HS Code consulting, domestic trucking, warehousing, and distribution. Joseph can be reached at joseph.walsh@ariesgl.com or 516-209-4517. 

The Mysterious Payment Methods a Factory Might Ask For

'Do you take Venmo?'

Unfortunately, no. 
But don't worry, paying for your order is less uncomfortable when you understand the different options.

Wire Transfers or Telegraphic Transfer (T/T)

For large transactions, a wire transfer is the fastest way to pay a supplier in China. It is accepted by all Chinese manufacturers and usually takes between 24-48 hours to arrive. You can activate it with your online banking system or set one up at your local branch. Fees vary but generally are under $45 per wire transfer.

Usually when using this method, the supplier will ask for a 30% downpayment of the order and 70% once the order is complete and ready to ship. We highly recommend that you do a secure due diligence check before deciding to send a wire transfer. Once the money has been sent, it's very difficult to get back. More info on supplier due diligence here.

Letter of Credit (L/C)

This is a more old-fashioned form of payment but is still used to add an extra layer of protection for both the buyer and the supplier. Remember, they don't trust you any more than you trust them. Once a Letter of Credit has been applied for and approved, your bank and the supplier's bank will automatically transfer the funds once the conditions of the L/C have been fulfilled. 

Escrow (Through Alibaba or other platforms)

In this payment method, the buyer would deposit the funds into a third party external account throughout the period of the production of the order. It's a secure method as it protects both the buyer and the seller, however can be expensive and locks up your funds for what can be a substantial amount of time. Usually this is used when a buyer and supplier are just starting their relationship, after they would move to T/T payments.

PayPal

Although it is expensive for the buyer to send money through this familiar platform, many still favor it because of familiarity and buyer protection. However, it is much less popular with suppliers due to difficulties withdrawing money, high tax rates and potential chargebacks that are hard to fight. Not a bad option for small orders or samples. 

Pro tip: Use common sense, and if in doubt, ask a third party to check from China before sending funds. A quick due diligence check could be the difference between 'all good' and 'all gone'. Feel free to contact us if you need help!

Getting a Grip on US customs

As a first time international buyer, you may overlook US customs. Communication is so comfortable with your manufacturer that you feel like you have a great grasp on the order. You certainly wouldn't expect to be left in the dark for something as important as: 'your items have been refused entry' or 'the customs tax on this container of sneakers is 48%'. However, from the viewpoint of the manufacturer, once the order has left their hands, their job is done. Keep reading to get a handle on what you need to know.

How much duty / tax will my order incur? 

In many cases, your supplier will tell you what customs category your product falls under. Ask them what HTS code they use. 
Pro tip: If the duty on their HTS code is high, it's worth double checking for yourself on the HTS website if perhaps your product could fit under a different category. 

What documents will I need?

This depends on what shipping method you choose. Click here for more info on shipping options.

For ocean shipments you'll need: 
1. Commercial Invoice - ask the supplier
2. Bill of Lading - ask the supplier
3. Importer Security Filing Information (ISF) - ask the supplier
4. Arrival notice - ask the freight forwarder

For air shipments you will need:
1. Commercial Invoice - ask the supplier
2. Airway Bill - ask the freight forwarder

Do I need a customs broker?

In short, yes, yes you do. Customs brokers will do all the heavy lifting once your shipment arrives. After you've found a local one that you like, you can ask them to estimate the costs involved in your order, including Merchandise Processing Fees, Harbor Maintenance Fees, etc...). 
Pro tip: You can also ask them to quote for a delivery to your warehouse as they usually have good relationships with ground transportation companies.

Unless your order is under $2,500, you will need a customs bond. Customs brokers can help you get one, either a single entry or a continuous entry bond to cover future shipments over the course of a year. You'll have to provide verification of your tax ID number and identity, and sign a Power of Attorney to allow them to purchase the bond on your behalf.

What else do I need to do?

Hand in all the documents to your customs broker and follow their guidance in regards to your specific order. Depending on location, size of the order and the contents, your customs broker will let you know if you need anything else. The sooner that you get in touch with a customs broker, the better off you'll be.