One question that comes up when considering how to source products from China is how to get your products to the U.S. once you purchase them or have them manufactured. Shipping by sea is the most popular shipping method for buyers when shipping from China because of its low cost relative to shipping by air, however it is not the easiest process for the inexperienced. Complicated issues can arise that can add expense and delay. To help prevent this from happening, we at Rad Sourcing have prepared this article to help educate anyone who is considering importing products from China or elsewhere to the US, by sea.
The Players
There are three major players in international logistics. These consist of shipping companies, freight forwarders, and customs brokers. Shipping companies simply offer the service of getting goods from point A to point B, and are often employed because of their broad reach- they can ship packages anywhere and they are convenient and easy to use.
Customs brokers are essential to navigating the regulatory process surrounding international shipments. They prepare and submit the necessary documentation to gain government authorization to important your goods into the United States. They can also help set-up the delivery of your products from the airport to your third party logistics provider or to your warehouse. Customs brokers are often located at major airports and harbors to serve the international traffic.
Freight Forwarders help arrange the shipment of your goods and may coordinate with shipping companies and customs brokers for you. They offer more hands on help than most customs brokers and may be a better fit for those with less experience shipping from China. Often times sourcing agents, like Rad Sourcing, will handle this process for you and help you decide which services to employ.
The Terminology
Now that we have briefly touched on the players in the International logistics space, it is important to understand the international standards that govern it. Shipping Incoterms are international standardized codes which indicate where and when cargo will be transferred between the supplier and the importer. These are used by the International Chamber of Commerce (ICC) and by international and domestic trade contracts. Some common terms are:
Free on Board Shipping (FOB Shipping) signifies when the liability and ownership of the shipments is transferred from one entity to the other.
CFR Shipping (C&F Shipping) stands for cost and freight. It signals that the manufacturer or the seller needs to pay the costs associated with shipping the goods to the client to bring them to a certain port of destination. Once this is done, the liability for the goods is transferred to the buyer,
CIF Shipping (Cost Insurance & Freight) denotes that the seller, perhaps a Chinese factory, is responsible for arranging the shipping of your products by sea to the port of destination. They are also required to provide the buyer or sourcing agent the documents needed to obtain the goods from the carrier.
Full Container Load (FCL) vs Less Than Container Load (LCL)
One important component of shipping that inexperienced buyers have to navigate is whether or not to ship a Full Container Load (FCL) or a Less than Container Load (LCL). An LCL shipment refers to a shipment that will not fill an entire container, which means your products are shipped in a container with one or more loads from other customers of your preferred freight transport service. This option does cost more per unit than a FCL but is the better option for those that are not shipping enough inventory to fill a 20-foot container due to the cost savings and convenience. As with most everything in mass production there is an inverse relationship between quantity and cost. One significant convenience of LCL is that you do not have to worry about dealing with the container after delivery, unlike shipping a FCL were often times the recipient is responsible for returning the container or purchasing it. Although, some services like Rad Sourcing have contacts to help you sell the container and will deal with it for you
A common misconception about FCL shipments is that you have to have enough cargo to fill the entire container, this is not true. A FCL simply means the entire container is yours to fill with your goods and you do not have to worry about sharing the space with other buyers. One easy calculus to use to decide whether or not it is broadly more cost effective to go with a FCL is; If you are shipping 6 standard pallets in a 20ft container or 12 standard pallets or more in a 40ft container. For shipping less than these quantities LCL should end up being more cost effective.
If you have any other questions about sourcing, manufacturing or shipping your products from China please reach out to us at RadSourcing.com or email me directly at [email protected].