Your importing and exporting business may use one or multiple means of transporting your goods from one country to another. When considering the various options it’s always best to determine what option is most suitable for your cargo depending on the nature of the commodity, the routing, cost and also timescales for delivery.
Ocean Freight Rates
Ocean freight is the most common mode of transportation used by importers and exporters. The other international freight transport modes such as courier, standard air freight and express air freight are all significantly faster, but they are also much more costly.
- One container can hold an enormous amount of cargo, and ocean freight is cheaper than moving consignments by air.
- There are many laws both international and national, not to mention carrier organization regulations and individual carrier regulations which define defining and restrict what goods are considered dangerous for transport and whilst both have strict guidelines you can ship some products by sea that would be not accepted by the main airfreight carriers.
The downside of ocean freight is transit time. Whilst typically air freight can range anywhere from a day or 5-7 days for the major carriers sea shipments take longer to ship. Shipments from China may take 4 weeks as opposed to days if it was sent by air. Your freight forwarder will be able to check schedules and transit times and see if there are quicker and more direct sailings available.
LCL charges are based on the CBM and weight of the consignment and also on the terms of the shipping negotiated by the seller and buyer. A set of terms which outlines the responsibilities of the seller and buyer has been developed to try and add clarity to international transactions but still, they are often incorrectly applied or misunderstood, Businesses involved in international trade should familiarize themselves with these terms and be sure as to who is responsible for what shipping charges.
For full load shipments, the price fluctuates monthly and depends on what port it is shipped to and from and also what size container. In the last few years, the rates have been low causing a lot of the shipping lines to merge due to ongoing rate instability.
The three most common variations are EXW, FOB and CFR. Effectively in these instances *EXW means that the buyer is responsible for all shipping factory to factory, FOB is where the seller will pay for the costs up to loading at origin and CFR is where the shipper pays and organizes for the shipment to be transported to the destination port.
Freight consisting of: Basic Ocean Freight, CAF, BAF
Destination Charges: Customs Clearance, THC, Documentation, Delivery
Air Freight Charges
Air freight is used by international importers and exporters when they need to get cargo somewhere rapidly and reliably. When it comes to air freight, weight and volume are key factors. Air carriers will charge by either volumetric weight (also known as dimensional weight) or actual weight, depending on which is more expensive.
- Aeroplanes are so much faster than their ocean liner counterparts, but there is a cost associated with this and the carriers and handling fees are much more expensive and you have very limited time in which you have to clear the consignments once they arrive at the destination airport
You should give careful thought to how quickly you need your cargo and what exactly you are shipping and make the decision as to whether the increase in prices is worth it for the quicker transit.
Some common ideas that are shipping via freight are documents, pharmaceuticals and electronics.
The general rule is that you are better to ship by sea unless the goods are small or they are very time sensitive as you pay a premium for a quicker service that can get extremely expensive the bigger a consignment gets.
In addition to Airfreight charges up to the airport of destination, you have airline handling, customs clearance and delivery fees to consider after the goods have arrived.
- Airline Handling
- Customs clearance
- Use of carrier deferment
Truck Freight Charges
Trucking can be a very cost-effective way of shipping your freight both from ports to the final destination but also for example throughout eastern and western Europe.
Trucking freight costs are based upon the size of the shipment, whether it is full load or pallets and also on distance, countries of origin and destination and sometimes also different classifications and standards than other transportation modes. All commodities fall into one of 18 classes between a low of 50 to a high of 500 based on four transportation characteristics: density, stow-ability, handling, and liability. The two primary limitations to using a truck for cargo delivery is cargo size and weight limitations, and it may not be cost-effective over long distances.
Typically it is better to ship by road to and from Europe for obvious geographical reasons but the costs vary significantly with exports often far cheaper than import.
- Cost effective and economical over short distances.
- Freight can be delivered as per a set schedule, increasing cost-effectiveness.
Potential Clearing and Forwarding Charges for all Shipping Modes:
Customs Examination Fees – Normally, customs will conduct exams targeted at specific problems or particular types of shipments. However, even if you are completely organized your goods can be subject to these kinds of examinations, it’s always best for you to be as prepared as possible. If an exam like this does happen you’ll likely have to pay a fee, and possibly even deal with more charges incurred from delayed cargo if the examination goes longer than expected.
General Rate Increase – A general rate increase is a surcharge which carriers add on top of their regular base rates. A GRI can occur across all or only a few trade routes during a specific time frame. Usually, carriers announce the updated costs at the beginning of the month and will adjust rates based on the current volume situation.
Inland Delivery Charges
If you do not specifically ask to be quoted door-to-door rates which with origin and destination postal codes, the forwarder might be charging you a port to port rate.
Not all cargo can be shipped directly from one port to another. Sometimes, goods need to be transported overland to a port (or vice versa) before they can be delivered to the buyer. It is important in this instance that you pay attention to whether or not your shipping quote includes the inland delivery fees, and doesn’t just cover port-to-port transportation.
Also if you get the shipper to coordinate the freight to arrival port (CFR) then the inland charges will differ depending on who they use so often there can be a lack of transparency particularly with LCL (less than container load) In these instances it is beneficial to confirm with the shipper in advance what the destination charges would be for terminal handling and documentation.
As an importer/exporter, it makes sense to do your homework and talk to your freight forwarder or carrier about duties you can expect to pay on your cargo. It’s best to plan for higher fees just in case. Customs has the right to charge you as much as the domestic value of your goods in fraudulent circumstances and up to two to four times the amount of duty you actually owe if you are negligent in your preparations.
Demurrage is a fee applied to cargo which stays too long at a destination port. In general, you to keep your cargo at port (usually 4-7 days), both in import and export situations. Therefore you need to ensure that everything is in place and that your customs broker or freight forwarder makes the necessary customs and delivery arrangements in advance to avoid the fees which can sometimes be quite expensive and charged on a daily basis.
No matter your method of shipping extensive research is required to maintain optimal business practices, especially when shipping internationally. There are many factors to be considered, make sure you are well informed for a smooth process!