In this blog we quickly look at the basic details you need to understand about shipping from China.
The import and export world runs on INCOTERMS – an acronym standing for international commercial terms, and sets out the terms that you are buying goods. There are numerous abbreviations on the terms that you can buy goods, but we focus on providing our customers only 2 options FOB (Free on board) and CIF (Cost, Insurance, Freight) with the vast majority of our agreed terms being CIF for simplicity. CIF includes all the costs up to UK port and allows buyers to rely on the suppliers to negotiate good freight rates, whereas FOB excludes the freight cost from China and the buyer is free to negotiate. Buyers new to foreign business should ensure they state their preferred terms when requesting quotations.
2. Types of Shipping
The vast majority of goods travel from China on container ships in 20’ or 40’containers, but it is a popular misconception that you need to fill a container to justify buying. Many of our customers buy on an LCL (less than a container), where the goods travel in containers with goods for other customers. Goods take about 27 days to travel, but it is important to assume an additional 7-10 days to get the goods from the factory and through customs checks and the boat leaving, as well as an additional 4-5 days from arrival in the UK until you see them. There is the additional option of sending goods by air (or express) – but these come with a significant cost premium. There are multiple options of direct and indirect flights, as well as a combination of sea and air freight. The freight rate can vary considerably, and the recent rates are been around £5/kg. There is the addition of a train service from China to Europe (Yiwu – London) which in theory offers a 17 day transit, but we have never found the service available, but could be a good option for the future.
3. Freight Forwarders
Whilst shipping might seem somewhat intimidating to first time buyers, the industry is supported by Freight Forwarders who specialise in processing the documentation and make the process simple and straight forward. We supply our customers and their freight forwarders all the necessary documentation (Bill of Lading or Air Waybill) – this is needed to ship the goods out of China as well as to clear and deliver the goods. Whilst it is a very competitive industry, Freight Forwarders come with their own costs, and also collect any relevant VAT and duty. The cost of the Chinese Freight Forwarder is included in the price on FOB and CIF terms.
A key factor to investigate before you develop or import goods are whether there are any restrictions or conditions linked to your products. All goods need to be classified with HS of defining goods. Whilst trade with China is on WTO terms, and should not have an impact from Brexit – the situation is a little unclear, and there might well be changes in the future as the UK moves away from European duty policies.
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We have been shipping weekly to our customers for over 20 years, and have had incredibly few issues – so problems are not common. Risk do arise if shipping LCL, and containers can be seized for inspection on ‘other’ goods within the container – Chinese authorities are not particularly forthcoming as to when they will resolve issues, and we have experienced associated delays. Delays can also come during economic disruption, where shipping companies struggle to fill their ships and consolidate containers from multiple ports. Christmas can cause freight delays, but since it seems it will be cancelled in 2020, this should not be a problem this year.
Overall, the process is relatively straight forward and will require little time or input for a customer. It is worth remembering that delivery access will be required for a large vehicle, and that some equipment may be needed for moving goods around on receipt.