International Freight: 6 Mistakes That Rookies Make

Nowadays, if it doesn’t have an app, Alexa will work it out for you. There are exceptions of course. International freight is massively, frustratingly, un-automatedly, one of them.

No wonder the industry has low “transparency.” That is, you may not get answers to basic questions like how competitive a quote is, or how well a freight forwarder rates. Even shipment tracking is sketchy compared to international couriering.

If this seems alarming, you’ll probably want to do some research to avoid making common mistakes. But it’s a difficult subject to research – good online information is fragmented.

Fortunately, the industry is starting to change. But, for now, here are the classic rookie mistakes, and how to avoid them.

1st Mistake: Not Checking Compliance

Many importers only find out at customs that their seemingly innocuous product is regulated by the FDA, USDA, etc. Others find out too late that they have fallen foul of copyright law. Ships and planes, too, have hazardous cargo restrictions. Forwarders can’t keep up with all the regulations, that’s what regulatory consultants do. To avoid being surprised by hefty duties, impounded shipments, or stranded cargo:

●     Check your product online for import restrictions (banned outright, banned import from certain countries, anti-dumping duties, will require fumigation, etc.). Better still, look your product up on an import restriction and duty estimate tool.

●     Check online tools for copyright infringement. If your product, it’s label, packaging, even package wording is similar to a name product, check that product’s site for IP details. If in doubt, get legal advice.

●     Look your product up on a carrier hazardous goods table.

2nd Mistake: Letting The Factory Handle The Freight

International sales agreement must include a standardized freight term called an incoterm. The incoterm the buyer and seller agree on determines where in the shipment responsibility and liability transfers from the seller to the buyer.

Most suppliers have a preferred combination of incoterm and selling price. Often, the favored incoterm is CIF (Cost, Insurance, and Freight), whereby they arrange freight as far as the US port. That sounds attractive to someone new to international freight, especially if the freight component of the deal seems very cheap.

The problem is, several things can go badly wrong on CIF. Most commonly, sellers get a nasty surprise when they find out that they have to pay the supplier’s forwarder for US port charges. They’re effectively holding the shipment hostage, and often dramatically inflate charges to recoup their freight costs to the US port, and then some.

Go for FOB (simpler) or FCA (less liable to dispute) incoterms instead. Also, consider EXW if the factory doesn’t provide free transport to port. There’s a lot riding on your choice, and these three letter acronyms can be confusing, so it’s well worthwhile finding out more about incoterms.

3rd Mistake: Thinking Buy Price, Not Landed Cost

When negotiating the deal, many buyers only focus on buy price. But is the deal so great once freight costs are factored in? Seasoned importers work to landed cost (buy price + freight + duty) instead.

To calculate the landed cost, ask your supplier for buy prices at both EXW and FOB. Then get estimates for their respective freight costs (EXW is door to door, and FOB is foreign port to door). Either ask a forwarder for quotes, or use a freight rate calculator with Amazon FBA destinations built in.

Finally, check potential customs costs using a duty estimator. Calculate what your target buy price should be for each incoterm, and now you’re ready to negotiate a good deal.

This is a worthwhile exercise even if you have already signed the sales agreement. You haven’t paid yet, so you may find some room to renegotiate.

4th Mistake: Choosing The Wrong Mode

Most forwarders expect the importer to tell them whether the shipment will be going by courier, sea or air. That’s not a good idea if the importer is misinformed or uninformed.

Air freight is quicker and sea freight is cheaper. That’s the rule of thumb, but there’s more to it – restrictions may apply, and the cheapest option depends on shipment weight. The following table is indicative only.

 * Each mode has a quicker premium option.
** For a less than container load, China-US West Coast door to door.
*** These total shipment weight bands are approximate.

5th Mistake: Not Complying With Amazon’s Shipping Requirements

BQool users are no doubt familiar that Amazon has requirements in many areas of their business, so it won’t be a surprise that they have specific requirements for imported stock. This Freightos resource ensures that Amazon requirements – such as pallet and labeling requirements, paying customs, delivering to multiple Amazon warehouses – are complied with when requesting a freight quote.

Make sure, too, that you work with a forwarder who is familiar with Amazon’s requirements.

6th Mistake: Thinking “What If The Cargo Get’s Lost?” But Not Following Up

Forget about how many containers are lost at sea each year, it’s nowhere urban myth levels. But shipments regularly suffer damage or go missing. It’s easily overlooked, but here’s why it’s a big mistake not following with cargo insurance:

●     Forwarder and carrier standard terms and conditions limit payout to a paltry $2.00/kg (2.2 lbs).

●     Cargo insurance is so cheap that you don’t even have to do the math or shop around. Be sure to specify                   “comprehensive cargo insurance” on every freight quote request.

The other big reason shipments go missing is insufficient labeling. Smaller shipments often get lost at consolidation centers (the place where air freight and most sea freight are packed with other shipments prior to loading or after unloading. Make sure each item in your shipment is carefully labeled with at a minimum – carton count, country of origin and FBA shipment tracking label.

7th Mistake: Doing It Alone

If you’ve been counting, yes, this is a bonus mistake! And it’s the worst mistake that rookies can make. Shit happens. Only experts can manage international freight without the help of a forwarder.

Absolute beginners can make all kinds of mistakes, of course, so it’s well worthwhile doing more research. This crash course in international freight is a great place to start.

Freightos helps new importers out in many other ways too, especially the Freightos Marketplace – a one-stop shop for instantly comparing quotes from 30+ forwarders, instantaneous shipment booking. It includes tools to help manage your shipment and it comes with 24/7 support.

BIO

John Edmonds is a logistics expert who loves writing about freight (who doesn’t?) at Freightos. Outside of work he enjoys cooking, cats, and cricket (the game, not the insect).

BQool Marketing

December 11, 2017

Pauline's passions lie in eCommerce and supporting individuals in their online selling endeavors. Currently, as a frequent contributor to the BQool Blog, she channels her passions into creating informative contents that break down the complex challenges Amazon sellers face on a daily basis.