The lowdown on international freight
Editor’s note: This is a guest post from John Edmonds. Marketing Specialist at Freightos.
As you grow your business, there’ll probably come a point when you’ll want to tap into the international economy.
Making the switch can be a great opportunity, but there’s a lot to learn – like sourcing, international payment, and freight. That means doing a stack of research, getting by with a lot of luck, or having an expert give you the lowdown. If you’d rather take the third option for international freight…here it is.
There are five legs to every international shipment: pickup, origin, main leg, destination, and delivery.
- Pickup: A truck arrives to pickup your shipment from the factory floor.
- Origin: The shipment is delivered to a specialized warehouse, where it is “consolidated” with other shipments, either within a container (for sea freight) or in skids to be trucked to the airport. It then gets cleared through customs. Countries that heavily rely on exports tend to only focus customers efforts on a few products, and also tend to have simple customs processes.
- Main Leg: From there it gets trucked to the seaport or airport where it is loaded by the port authority (terminal). The reverse happens at destination. Incidentally, terminal charges are usually grouped with origin and destination charges on quotes and invoices.
- Destination: This step is similar to Origin, except this time, there is more to customs clearance. Most shipments are routinely cleared, but something as seemingly minor as data discrepancy might trigger a customs inspection. You’re directly responsible for paying any consequent charges and penalties before the shipment can be collected.
- Delivery: Delivering an international shipment is much more complex than domestic trucking. There’s a lot more juggling of costs and timings involved with port pickup, and also with delivery to warehouses. Some fulfilment centers, like Amazon, have rigorous appointment and delivery requirements. There also needs to be time assigned for checking and prepping. Extra time also has to be allowed for contingencies, because many things can go wrong. For instance, the shipment may have been held up in transit, or there may be a problem with the delivery truck.
Well, that’s the easy part dealt with. There’s much more to international freight than the shipment. In fact, your new-found knowledge will be coming in handy at two prior stages: product research and supplier negotiation.
Check that a product is not subject to one of three types of restrictions:
Import restrictions. Even everyday items like sunglasses, leather linings, and some packaging materials may attract Customs attention. Anti-dumping duties apply to some products, as recently happened with Chinese imports of colored pencils.
Carrier restrictions. Some everyday products, like battery toys, are on air/ocean carrier lists of hazardous products.
Intellectual property restrictions. You may be breaching copyright and trademark laws if your product, even the wording on the package, is similar to another product.
Find out how these restrictions might apply to your product:
- Conduct internet searches for each restriction type. Get legal advice if any hint of intellectual property infringement comes up.
- Search deeper using online tools for import restrictions and duty estimates and for hazardous material classification. Ask a forwarder for help with any gray areas.
In your discussions, keep these three things in mind: incoterms, packaging and building trust.
Incoterms are internationally standardized freight terms which must appear on the sales agreement. They define when the legal responsibility and liability for the shipment transfers from the buyer to the seller. That may not seem like a high priority when you’re negotiating a buy price with your supplier, but consider this:
- The wrong choice can have serious consequences. If you can’t spare the time to research incoterms in depth, then only agree to Ex-Works (EXW) or Free On Board (FOB).
- Without factoring in freight costs, you may not have a good deal. For instance, a higher price (but on FOB, where you’re paying less freight costs) might be a better deal than a lower price (on EXW).
Avoid extra packaging. Packaging sells, but it can also unnecessarily add cost, especially for air freight. Also, check that your supplier is using the smallest, standard box size, to optimize how they fit on a pallet.
Double-box fragile products. This method adds extra cushioning for the first box. Bubble wrap works well. As does styrofoam peanuts, but many warehouses refuse boxes packed with them.
Carefully label shipments. Smaller shipments often get mixed up, so clearly mark cartons and boxes – carton count, gross weight, net weight, country of origin and tracking labels (like FBA shipment labels).
Improve product packaging. If the package uses much more space than the just the product, you face escalated freight costs. If your supplier is receptive, contact a local packaging company for cheaper, attractive, but still protective packaging ideas.
It can take time to build trust with a new supplier. Protect your interests by making other arrangements for the following tasks:
- Palletizing to Amazon’s requirements. Incidentally, pallets are not recommended on planes, because they escalate freight costs.
- Preparing for Amazon’s packaging requirements.
- Assuring quality. Arrange an independent quality inspection at the factory, at least for the first shipment.
Selecting a Forwarder
It might seem cheaper, but don’t try importing without a freight forwarder. Forwarders are middlemen who arrange the shipment. Many things can, and do, go wrong with international shipments – especially for beginners. A good forwarder will take over nearly all of the organizing and most of the stress. For instance, they will arrange the main leg booking with an air or ocean carrier, and (depending on your incoterm) arrange pickup. They will manage the complexities of customs filing and clearance, including advice on customs bond (if you’re importing into the US). And they are likely to be much more more experienced than a local trucking company at managing the delivery stage.
Other than asking around, finding a good forwarder has been fairly haphazard until now. But you can now find reliable ratings on some international freight marketplaces.
Going with a smaller forwarders can be a good choice. They usually have more time to focus on smaller customers and shipments. If the shipment is going to Amazon, you aren’t locked into using one of their partner truck carriers, but the forwarder must be experienced making deliveries to Amazon, and potentially familiar with their prepping requirements as well.
Requesting a Freight Quote
Preparing before requesting a quote is well worth the effort. Beyond the obvious pickup and destination contact details, collect:
Total weight and volume. Calculate from the details on the packing list (ask your supplier for this document).
Product Description. Refer to the commercial invoice (again, ask your supplier).
Mode. Determine whether you want an air freight or ocean freight quote. Air freight is quicker, but it’s also cheaper for smaller shipments. This freight rate calculator will give accurate freight estimates for each mode.
Prepping contact details. Whether that’s your forwarder, the fulfillment center, or a third party.
Insurance. You will be asked if you want insurance. Make sure that you specify you want “comprehensive cargo insurance”.
Importer ID. All Customs agencies will require some form of identification. In the US, this is your company Tax ID.
Once you select a quote, spend time setting out your communication expectations with your new forwarder, and finding out what they require from you, which unfortunately will include paperwork. Checking documentation is the most important contribution that you can make from now on in. It’s important, because even a tiny discrepancy between forms can lead to costly delays.
That’s The Lowdown On International Freight
- During product research, check for import, carrier and IP restrictions.
- Discuss incoterms, packaging, pallets (but not palletizing or prepping) with the supplier.
- Prepare before searching for a forwarder and before requesting a quote.
- Whilst your forwarder covers most tasks, you should focus on carefully checking all documentation.
International freight may seem daunting at first, but it’s well worth it. In truth, getting a good forwarder will take out most of the stress. Same goes for the Freightos Marketplace – a one-stop shop for instantly comparing quotes from 30+ forwarders, with instantaneous shipment booking. Freightos Marketplace also helps you manage your shipment, and comes with 24/7 support.
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).