China importing and interntl business info. requested

Re: China importing and interntl business info. requested
marti,

First of all it would be very helpful to know volume in both the physical and financial sense.

Are you going to import enough to fill a container? A partial container? Or is it more of a UPS type of quantity?

What are some balpark figures on the invoice amount? As you may expect, an invoice of a few hundred or a few thousand is very different from a 30,000 invoice in every way.

If you also tell us about the warehousing and distribution stateside this can be relevant, as you may be able to leverage the distribution logistics to help you negotiate better terms with the import logistics.

Anywho, I no longer work in logistics (as of this week, my new job is in an area where I have more expertise: web development) but I can give you some pointers based on my work as a logistics manager.

But the volume you are dealing with makes a world of a difference.



Ohh, glass sounds like it can be tricky. One thing to get from your prospective manufacturers )if they know this) is what freight class you are dealing with.

Understanding how the nature of freight works will help you negotitate your rates.

For example, something like computers is great. It has high value for the weight and volume.

Something like glass and such may make the freight more complicated, as it can complicate handling.

Knowing as much as you can about the frieght specifics will help you when you start negotiating.

You need to know the cube (cubic volume), weight etc. Fragile stuff can also be a concern and you may need to look into insurance (heck, I was importing gloves in boxes, hardly fragile but damage was a concern).

Knowing more about the product and shipping it is important. Don't count on the shipper (manufacturer usually) to know, in my experience even some experienced shippers pack their cargo improperly and cause you damage.

If your terms are such that you take ownership when the freight hits the water, you will need to be on top of this kind of thing.

I would even go so far as giving the supplier packing instructions.

Of course, if you can get different terms, you can avoid some of the complexities.

Here is a quick run-down of frieght terms. You may want to research INCOTERMS (International Commercial Terms) to get a better understanding of the implications of each, and the options available to you.

Some of them may not be available to you, depending on the supplier.

EXW: This means Ex Works and means you are responsible for picking it up at the factory (or whatever). The term will be negotiated something like this EXW Shanghai. And you need to look into the location (some places are better to export from than others, ask a freight forwarder) and the specifics (e.g. will they load it at the factory for free? Or will you need to handle this?).

This shipping term represents just about the most responsibility (and risk) on your part.

The benefit is usually in cost, having others assume the logistics risks usually comes at a small markup. Thing is, it may only be economical for you to assume these risks if you have experience and volume.

If not, you are probably better off with less logistics responsibility, and you may even save money if the party you are dealing with has enough shipment volume to get better deals than you can.

Volume is a key to nearly all freight negotiations.

I'm going to skip some local terms and get to other common ocean terms. Again, I am making assumptions because I do not know what weight/volume we are talking about. It may not even be ocean freight we are talking and may be air (much much more expensive, but if time is important Air may be the ticket).

FAS: Free Alongside Ship. These terms mean the manufacturer gets it to a port, and you are responsible for getting it loaded etc.

I don't recommend this for you, as a simple matter of getting cargo loaded can be a headache if you are across the globe and if you do not have experience the mistakes can be costly (one thing to familiarize yourself with is demurrage, as the cargo can only sit at any port for a specific amount of time, after which you will be charged exorbitant fees).

FOB: Free on Board. This is one of the most common ones and is probably the most responsibility/risk you should even consider. There is some confusion about this term so make sure that it's understood.

The standard meaning is that you take ownership (and assume the risks) on board a ship at the port of origin.

You are responsible for the freight costs and all, and you take ownership when the cargo is on board the vessel.

CFR: Cost and freight. Basically, you take ownership at the port of destination, and you pay the seller the cost of the good and the freight costs. You are responsible for getting insurance and any other costs.

CIF: Cost, Insurance and freight. Same as the above, except insurance is included.

I'm skipping a host of other variations of terms and gettinf to the easiest:

DDP: delivered duty paid. Basically, you take ownership at your location if you negotiate DDP <your location>. The seller assumes all risk and responsibility (including damage risk, customs and all) and your price is a delivered, headache-free price.

In an ideal world DDP is the easiest. But your supplier may not have the infrastructure to do so, and may not agree to it. Alternatively, they may not have the infrastructure to do so, and agree to it! This means they will probably just mark it up and make sure to cover the costs by charging you a premium for shirking the risk.

But if you get DDP terms, it is basically like buying the product in the USA. You have no import logistics headaches but the downside is that you may lose some savings from passing on the risk.



First of all, brokers are about as localized as taxi drivers. So you need a broker at your point of clearance.

You will probably want your customs entry point close to you, and you need a broker in that vicinity.

So recommendations I can give you are larger networks of brokers, and if you really want to shop it well, you need to look locally (e.g. phone book etc) in the point of customs entry.

You don't need to clear customs in the frontier, for example, I have had a product enter the west coast and clear in Chicago.

Nailing down a good customs clearance point is important. I recommend you get it as close to you as possible, but also be ready to clear at the point of entry (entry to the US) if needed.

My favorite brokers (we used many) were from M.E. Dey. You can call Kathy at 414-747-7010 and get info.

Note that they are based out of Milwaukee, and though they may be able to clear for you in any location through their network you may be better off with a local broker.

M.E. Dey is also a freight forwarder, and that was a big attraction for me, to consolidate the freight brokerage and customs clearance.



This is odd for a customs broker, as the fees are usually per-shipment.

The volume of the shipment means little, it's still the same amount of work for them. One shipment, one customs clearance.

The only variable would be the duty.



A customs broker basically just clears the shipment through customs (and FDA etc depending on the product). Think of it as basically someone who's sole job is to handle red-tape with the US government.

They basically just take the documents and handle the headache of getting a customs clearance. Because they do it in volume it's cheaper than it would cost you. And they usually charge around or less than 100 dollars a shipment.

They can also handle the duty etc for you and bill that to you.

A freight broker can mean several things. With a shipment from China to the US the cargo may pass through several companies and a freight forwarder is someone who consolidates it all.

You pay them, and they broker out the freight to the steamshipline (who would probably not deal with you anyway), the railyards, truckers etc.

You should shop this, and go with the best rates. I usually shopped it between many. I usually ended up going with M.E. Dey for my ocean freight even if they were not the best deal sometimes (sometimes another broker gets a better deal) because my logistics issues were more complicated than mere cost.

But when I had atypical shipments (e.g. an emergency air load) I'd shop it around, and I'd often shop the trucking around myself, and involve a few brokers and see who got the best deal.

So basically, you probably want a freight forwarder for ocean imports, as they will consolidate steamship, rail and truck. To do it yourself can range from impossible (some steamship lines will not deal with individuals) to a mere headache.

You probably won't get savings by doing it yourself.

You asked how to pique the customs broker's interest. Well, try consolidating customs and freight brokers.

The customs broker handles an important function, but the typical fees don't inspire a lot of responsibility (think of how much effort you'd put into a job you'd make 50 bucks for). They can do their best, but remember that it is 50-100 bucks to them, while the cargo may mean a lot more to you.

I've had custom brokers make mistakes that cost us 13,000 dollars. That they make so little in the deal means that there is little leverage to solve it (on the other hand, a freight forwarder who screwed up paid the costs of their mistake because our future business was more significant).

So consolidating it can help, and that is one reason I settled for M.E. Dey.



I don't know how you can investigate foreign companies, as I bought from companies that owned our company (we were actually a subsidary of our main supplier) and when we bought from other suppliers the type of legitimacy we needed was ISO certification and such. Much bigger fry.

So I can't say much about how to pick your supplier, but remember that if you settle for DDP terms, it doesn't matter. It's like COD terms.



The delivery almost always means a trucker just showing up at a destination. Heck, if you take more than an hour or two to unload it they may charge a "detention fee" of about 40-60 bucks an hour.

So make sure this is sorted before the trucker shows up, in all likelihood you need to be ready to unload it.

Of course, if you are warehousing it with a commercial warehouse, this will be part of their job and they will charge you for unloading, palletizing etc.



The freight forwarder can book it with insurance.

Thing is, the insurance is usually for catastrophic stuff (e.g. the ship sinks) and if you want that kind of insurance it may be costly.

I had insurance on alll my freight but routinely had to eat small damage losses simply on the basis of the insurance terms we used.

Again, if you get DDP terms, you have none of this risk.



Well.. you don't pay them. ;-)

Seriously, you negotiate a "ready date" and don't pay before then at the very least. From that point on, the cargo transit is dictated by the medium.

For example, from China to the West Coast will be around 20 days with maybe an extra week to clear customs and get to the final inland destination.



Depends on the supplier. We usually paid when we felt like it, and if the supplier was feeling frisky they'd demand COD type terms.

We'd have to pay them before they sent the bill of lading (without which the steamship line would not release our product).

So they'd make it, ship it and when it was in Chicago we'd pay and they'd Fed Ex the docs.



No, you just make a wire transfer. It's easy stuff and your bank should handle it easily.

Some suppliers may demand a letter of credit, which basically means the bank acts as an escrow and certified (and holds) that you have said funds available.

The terms you negotiate are contingient on your history with the supplier, your volume and their production cycle.

I did not work with "on demand" manufacturing, and placing an order just had to be coordinated with their line capacity.

So it didn't cost the manufacturers any extra, and they didn't need any assurances for the production.

Again, if you get DDP terms this too is a non-issue.



My pleasure.

more about quantities and a cultural question
Hey Thanks Craven.

I am a startup so initially my volume is small, testing the waters so to speak. My guess now, I will order 2-4 crates which are about 150kg each and worth 774.00-6340.00 (just merchandise - not including any of the shipping or other charges). I'm vague because of so many variables, which products, cheaper or more expensive manufacturer...what might sell and what quality will get the most profit instead of just what is lowest cost. I'm still researching that too... Hmmmm

Initially I was going to operate from a property I have...to lower costs, instead of a commercial warehouse. This complicates unloading since I can't lift a 450lb crate of breakables...I guess that makes me a whimp... (I was hoping it was like the lumberyard delivery trucks with the forklift towed behind...)

So far almost 100% of the manufacturers are quoting FOB and 100% payment upon order. Rather risky since I won't even know for 2 months if I'll get anything.... I really want a broker that will handle ALL import concerns for me, I am just one person so the cost of that will be worth it. I am interested in the product design....and then in advertising and selling it - and with just that I will have plenty of work cut out for myself. I don't want to spend all my time with the other manufacturing and shipping concerns.

One manuf. said they would do CIF but the cost is astronomical. After reading your reply I may consider doing that the first time or air shipping from the lower cost manufacturer. In long run I would want to deal with the lower cost manufacturers and ocean frieght on whole containers or I will never make any money. Initially I just can't risk that much $$. (Hey I too am a web developer (out of work) so I've decided to persue some other interests and see where it goes).

Thanks for the info. Perhaps it is just a matter of ME stating the terms and getting tough (like letter of credit and payment...later). Seems the risk is just so high if payment is first thing. Maybe they will still go for it...maybe not. How are the chinese when it comes to negotiating?? (this is a cultural question - some cultures reveer nego. and assume there will be a long negotiation - some find it disrespectful and their first offer is the best) do you have knowledge/opinion on this?

If you have any other comments now that you know more of the quantity and value, I'd appreciate it.

Thanks again!

Marti

Re: more about quantities and a cultural question


No problem.



This is just about the hardest level of volume to work with. Way too low to have any leverage but too high to economically deal with easy alternatives like UPS.



Well, with merchandise there is usually warehousing, and the loading/unloading is usually a function of the warehouse (and the receiving/shipping is usually a more substantial part of warehouse costs than is the warehousing itself).

So you can certainly pay to get this done, but doné expect it to be automatically included.



Indeed, and truth to tell you probably won't have the leverage to get off of FOB for a while, unless you pay exhorbitant amounts for shifting the risk to the sellers.

Most sellers are not well prepared for assuming those risks with completely new logistics and their quoted costs will reflect this.



One word of caution: a broker may well agree to handle all these concerns, but do note that they are unlikely to take responsibility for them.

If you want them to take responsibility for the risk their prices would be substantially different.



I hear ya, logistics is boring work with risk. Thing is, for what you are trying to do, logistics is where profit/loss will be determined (after sales of course).



Yeah, they are used to FOB and if they take on additional risk they pad the cost. but do note that the difference may largely constitute unavoidable costs for you.

In other words, much of the cost difference between FOB and CIF may be the logistics costs you can't avoid.



Note that air shipments are likely to be far more expensive, and you still have a lot of the associated costs and risks.

Air shipments really only make a difference in transit time, if you are still taking ownership on FOB terms you still have all the risks (damage etc) and responsibility (making sure it actually reaches you).



This is usually how it goes, which means you need a good thumb on the pulse of sales potential. Because if you get the sales potential wrong then you have even bigger losses (if you are importing containers).



Maybe, but remember that if the seller doesn't have the infrastructure to handle the logistics responsibility and risk they will either need to refuse or need to pad the cost to cover their risk.



Getting scammed would, indeed, be a risk. Then again for them it would be a risk to ship product to an unknown.

So you may want to look into escrow-type options like a letter of credit.



On a cultural level I can say they negotiate, of course the individuals may not have the desire to if they do not have the infrastructure to assume risk on your behalf.



I can tell you now that you need to know the cube. For some freight quoting the cube is more important than the weight.

Marti, I can not give you such professional suggestion like Craven, even though I did a forwarding operator job in a shipping agency company in China. Same as Craven, I am a web designer in IT industry

I can give you some information for your small business, hope it can be help for you.

Do you know alibaba.com? In China there are thousands of factories and company registered in this website. Alibaba China Here you can search your products which you are interested in if you can read Chinese. When you contact with some factories you should ask them if they have the export licence (you can save some money). For home decoration, you can see Shanghai Tang. There are lots of artcrafts designed by Chinese people and foreigners. You can know more about Chinese products. Unlucky, they are only for retail.

Another way you can find your products is attending some exhibitions in China.

BTW, I am planing to build a web site to sell Chinese folk arts Maybe someday we can share some experience here

Any experience with SR international
Hey Craven (or anyone else who knows...) have you had any experience or heard of experiences with SR international (shipping and customs broker)? Let me know if you have any knowledge.

Thanks Craven!

And thanks elfself for the website, I'm going to check it out, but I have no chinese skills so I'll have to see what I can do about that.

Thanks Again!

Marti

Marti, I know some forwarding and customs broker in Shanghai China. My brother is a shipping operator in a forwarding company. In fact, shipping company only accept booking containers from forwarding company.

First you should know if the product supplyer in China has the export right. If they have the right you can contact with forwarding company director, usualy they will help you to find a customer broker and arrange internal transportation for you. Or you should find a Import and Export company in China to help you to do everything about export in China. And I know some I/E companies also in China.

Marti, ShanghaiTang website is an English website, so you can read it:) If you want to find some product supplyer in China I can help you and search some factories information for you. Lots of Chinese factories employee can communicate in English.

Thanks elfself that would be great! - but not today....
Thanks so much elfself!

I really appreciate your offer of info. and I will definately get back with you very soon.

For now I just needed to move with the info I had at hand - I have a few manufacturers and shipping brokers names and quotes. I've picked one and I need to get my order in immediately to get it in time for Christmas. So...I can't jump ship right now or nothing will happen for the high shopping season. I'm not sure that I'm going to make much profit now though but I needed to get some stock to get going. I'm really scrambling now to finalize things. In the future though, I will be in constant need of new information that can lower my cost or expand my options. I will get back with you when I have this order covered...

Thanks again!

Marti

marti, can i use your posts on my web site
marti,

i have done a few small volume imports (less than 1 cube) myself and felt this is an area that requires special knowledge, and i might be better off providing import services to US small business owners who want to start off making small volume orders from China directly. i found your posts, like the one i am attaching below, makes very nice advertising material for my business. can i quote your posts on my website?

Thanks.

jack.

"So far almost 100% of the manufacturers are quoting FOB and 100% payment upon order. Rather risky since I won't even know for 2 months if I'll get anything.... I really want a broker that will handle ALL import concerns for me, I am just one person so the cost of that will be worth it. I am interested in the product design....and then in advertising and selling it - and with just that I will have plenty of work cut out for myself. I don't want to spend all my time with the other manufacturing and shipping concerns.
"

Jack -yes you can use this quote - sorry so late
Jack

You can quote the line you asked about...

I don't know about all my posts though. I wouldn't want any of the particulars of MY business or anything too specific about me posted... nor would I want anything that gives too much info. away to a competitor. If you let me know the particular lines you like I will say yea or nay.... Sorry this took so long I am really swamped these days.

Marti

Marti - pocket bikes
I was also thinking of investigating further on importing these. I'm from Toronto ontario area. Maybe we could split on some.

Looking for Boutique Freight Forwarder/Customs Broker
Craven (and anyone else who'd like to contribute),

I'm amazed at the depth and breadth of knowledge about customs and freight forwarding. I hope you'll share some advice with me like you have with the others in this thread.

I live in Los Angeles. I'm wondering who I should look to for help with my freight forwarder/customs brokerage needs.

I'm not very price sensitive; rather I'm "service sensitive." In other words, I'm willing to pay a premium, say an up to an extra $100-200 per shipment so I have very few hassles. Is there a little boutique freight forwarder/customs broker you can think of that might be best for me? Or is DHL or one of the other large parcel companies the way for me to go?

Ideally I want packages picked up at my door here in Los Angeles, shipped to China, and then have them brought back to my door.

I spoke with Kathy at M. E. Dey Company. I told her that you had recommended her. Kathy struck me as a sweet lady. We had a nice chat about a month ago for about 1/2 an hour. She said she'd be glad to work with me importing items from China. She referred to her colleague Randy for my exporting needs. I spoke with him about a month ago too. Unfortunately I think I'm a bit too small to be of interest to them. Randy hasn't returned my e-mails and Kathy, though she has returned my e-mails, hasn't been available on the phone.

My primary need is exporting 100 cell phones (35 pounds) per month to China. I need to have some components added to the phones and then re-import (is that a word?) them to the US. I may increase this number to 500 by the end of the year, but in terms of weight I'll probably be under 200 pounds for at least a year.

Randy mentioned I may need to fill out an FCC form "Statement Regarding the Importation of Radio Frequency Devices Capable of Causing Harmful Interference." There's also the matter of declaring the phones when I export them from the US to China so that when I import them back from China to the US I only pay duty on the "added value" not the phones themselves.

Of course there's also potential problem for the assembly place in China. They need to avoid paying deities altogether. So they will want to declare the phones when they import them (possibly having to leave a deposit) and then declare the phones when they ship them back.

Ken