International Freight – How to start importing from a freight forwarders eye.
Dealing with International freight can be overwhelming. Everybody knows that we require and need small businesses to develop and grow. This is how many companies started. We continue to develop our society towards becoming better employees but never entrepreneurs. If you’re the few who have decided to pursue a path for themselves in deciding to run your own business specifically in the importation of products from across the globe, then this article is for you.
This article is different from many those that you have read about international freight. Why is it different? Because most of them have been written from the perspective of suppliers and importers / and or parties alike. Whilst the information they provide can be useful and beneficial there is no contributing information from fellow freight agents or shipping specialists. This lack of knowledge given to our new importers or exporters can create many pitfalls and gaps.
Building Relations with Your Agents
When you decide you will import goods and sell them, there has to be a means of transporting those goods. This article is written from a reliable freight agent who has seen what new importers go through so its best you understand and work with your freight agent. It takes 2 to tango. You will understand that once you develop quality products and ensuring good relations with your supplier, how you can then take on the relationship with you shipping agent, to ensure you understand contracts of shipping, incoterms, mode of transports and more.
We will be focusing on how you make relations with suppliers and freight forwarders in this article. You must understand the language in both industries to truly have a successful upcoming business, with less costly mistakes. This is a true necessity as most new importers don’t budget the shipping or understand the tax’s involved, costs, how it works and in the end decide not to do it again. Planning, building and implementing your idea from ground up along whilst working with your freight agent will help improve your success.
In today’s topic we will cover a country such as China. All suppliers work hand in hand with their freight agents to ship their products to their customers. The shipping agents work for them, so if you do not have good volume on your side, you may see additional costs when it enters the country which goes back to the Chinese Shipping agent and Supplier as an additional profit share.
Lets start !
Products Sourcing and Alibaba
From experience the largest online B2B (business to business) platform on the net is Ali baba. Majority of new importers I have dealt with, have all sourced suppliers from this platform. China is still the “go to country” to get things whole sale and cheap. You can always use this platform as a good start.
Know your product
When you have a fair idea of what type of products you will be importing in the world of international freight , jump on to Alibaba to have a look. Suppliers in China aren’t always the manufacturing company. There are middle companies to which they sell the products purchased from a direct company. This is fine to do in the beginning. Why do I say this? Because direct factories are more inclined to deal with importers who have good volume of products to manufacture and yes “lot more Capital”. If you can find a supplier who is directly working with you on your product, then that is great. With this in mind, always keep a note to stay with Suppliers that have been on the platform for a good amount of years. It is not advisable to go with new companies especially if you plan to conduct all your imports from your country to start off. Cost does play into it and new starters can offer cheaper prices, but first you need to establish not to get ripped off. Remember if you send your money to somebody offshore, there’s very little chance you are in a position to get it back.
Close shop and re-open with a new name comes to mind. Keep that in the back of your head when choosing the suppliers. You have found a supplier that has been in business for an extensive time. The supplier has been on Alibaba for 10 years.
Google their website, check to see if this supplier is on google. Does he display an address? Check on google maps to see what his site looks like. You can then see what the factory looks like. Are there any discrepancies from their place? Looks like an abandoned building but they say they have not moved in the past 10 years. Red flag, always do your research as you would for a domestic country.
You have a list of suppliers now. Contacting them through Alibaba seems safe enough to do so and surely everybody will tell you that it’s the first way of making contact. What’s the alternative?
Contact them through the platform but try to speak to them through either a “mandarin speaker” or a chat called “We Chat”.
Did you know “ We chat” is like the Facebook we have in western countries. The Chinese use we-chat to talk to family members, friends, business colleagues, basically a tool for everyday life. Take this tip to learn the chat app and get used to it. Your job is to form great relationships with these suppliers, as they will ensure your quality, timely products and price for years to come.
Another factor to consider is that you are a new importer. Volume is not on your side. Before you decide to haggle for the price extensively, remember if you don’t then go to lengths try to bargain them down. You will have this power later down the track once your established. For now, look for quality and a good price. Form good relations. Don’t rush into the MOQ ( minimum order quantity) and price as a means of first contact.
A good tip when writing emails or starting a chat, always start with “Dear (name)” . Yes, may sound Odd, but its very polite. If you have done you homework on your product, then ask the supplier specifics of what type of product you are after. They are less likely to ignore your request and more likely to work with you. It is always good to check if the supplier returns their email or has prompt contact with you.
When this happens, it means they are receptive. Ensure you are ready to purchase when negotiating. When you find a few good suppliers start to negotiate a deal. No supplier wants to spend their time answering too many questions for a new importer without the volume. They rather focus on customers that are ready to buy with a larger order rate.
Another Tip / option is trade fairs or exhibitions in China from Suppliers.
If you can make the trip this is a good option. Make relations with them and check out their factory first hand. Safest but most expensive bet.
Is this supplier the right one?
You have set your mark on these suppliers. You can escrow on Alibaba as a means of payment, although its still difficult and lengthy to get your money back, still serves as a payment method.
Check to see which payment method is good. They may have Paypal, or western union as other options. When we deal with our freight offices offshore we like to do business in western union, the fees are a lot cheaper and the world is very familiar with its process.
Now you know you have a good supplier you want to work with, how can you ensure that this will be a promising endeavor in regard to shipping for now and future?. Enter the international freight agent. Once you establish the suppliers you want to use.
Get in touch with a international freight forwarder who is friendly, personally and ready to help you grow. Like suppliers, many freight forwarders look for customers with that have volume shipments.
Their time and increasing profits are better spent on these clients. Work with a personalized forwarder. Once you find a great forwarder, start to have a chat about future shipments with these suppliers.
Something to consider when you pick an international freight supplier:
Pick a international freight supplier that is close to an airport / port. Why would this matter? Well let’s say you have a supplier who is 20,000 kms away from the port. When your business grows, and you require larger volume of products and cargo moved, you will have to pay for inland freight.
This means your look at minimum prices of 200-600++ USD extra to have this moved to the closest port or Freight depo. Not including the freight associated. What you want to do is have a supplier close to the airport / port, so you are ensured that you can minimize your inland transport. Inland transport meaning trucking from one part of the country to the other. Minimize your cost there.
Secondly, your freight agent can help you understand the key to all global trade deals. Incoterms.
A good YouTube link to understand incoterms:
Always consider the International freight incoterms when negotiating deals. Suppliers understand this. We look at the most common, I have seen in the industry from the thousands of shipments I’ve handled in my career.
FOB (Free on board) – Free on board means that the seller will be responsible and pay for the goods to be loaded onto the ship, that includes ensuring paying for all the paperwork, charges involved in getting the freight to the boat / airline.
This is a very common incoterm to use and great to reduce your risk from a freight forwarders point of view. This does not include airline / ocean freight from the airport or sea port to the destination airport or sea port. Your freight forwarder can give you the cost for that and any other costs involving the move.
Exworks – means that you will have to arrange the freight yourself. Your freight agent can handle this. If you have built relations, you can ensure they come in handy at this point to ensure the costs are minimized. Remember we spoke about a supplier near the airport / sea port?
This will save you some money if you are conducting an agreement for the purchase of goods for this deal. You are paying for all inland costs, document fee’s and the freight to the destination port.
You will bare all risk. Your supplier’s obligation is only to make the freight available for you, the risk is then transferred to you. Talk more about risks associated with incoterms with your freight agent.
CIF / CPT (Cost insurance freight) – This means that the supplier will bare the cost of transporting the goods to the wharf / sea port / airport including all paperwork involved for export clearances. The supplier will also pay for the cost of freight and insurance of the cargo.
When you think your cargo is insured, it is much better to go through your freight agent. Remember that if your cargo is damaged, what makes you think the supplier will honor it and refund you payment for the damaged goods? How will you claim from a Chinese Insurance agent?
It becomes timely and a nasty process. It’s a lot easier to deal with your freight agent who can help you obtain insurance. This will be easier to claim, and most times consumer laws protect you. It’s a lot easier to do business domestically when it comes to claims then offshore insurance agents.
Product samples and issues with customs
When you are ready to purchase ensure that you know exactly what you require for customs or quarantine compliance. Speak to your freight agent. If there is a product that requires special permits, declarations or trade certificates then you will be likely asked from them from customs or quarantine. If you do not possess them, then your goods will be stuck with customs.
God Forbid this is at the wharf / airline as after 2-3 days you will be charged storage. Its best to check with your freight agent, what you will require in terms of documentation for customs about your goods. A quick call and a willing freight specialist will get you on the way.
When your about to check the samples its best to ask the ships to be moved with a freight carrier such as DHL OR FEDEX. This way you can check the sample for quality and whether it meets your specifications. Fedex and DHL both have freight liner airplanes which are designated to only hold cargo. No passengers. The good thing is the shipping for very small items is quite cheap with these services. It dramatically gets expensive when your volume goes up.
Always start small and consistently ship the goods. You can check the supplier’s performance and quality of the goods each time. There is a lot of risk associated with making a large volume move in international freight without knowing your supplier over time.
Any supplier can send you grade A quality sample, but you put in a large volume and after paying all the port fee’s, customs tax’s, delivery fee’s you end up with crap products which you cant sell. The goods are worthless and there is nothing you can do about it.
Start small and build that relationship it will pay off. Once the volume goes up, your international freight agent will start working with you in building relations with your supplier and you, in terms of obtaining free trade certificates so you don’t pay duty.
If there is a trade agreement in place, further ensuring that you are advised what documents to obtain from the supplier to ensure your goods aren’t held at the wharf or airport incurring fee’s.
In conclusion while this small guide, gives great tips, its up to you and the willing freight agent to help you start. To find out more blogs and advice on cargo you can check out Freelance Shipping Pty Ltd blogs suited for new importers and small business’s.
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