VI: Shipping and Incoterms

7-button-apTransporting your product to an overseas market efficiently and competitively is absolutely critical. Using a good freight forwarder is essential, but you also need to understand the basics of shipping terms, pricing, and documentation.

(Please read-on, or if you prefer click here for a video on Incoterms.)
(Or, you can click here for 2 videos on shipping documentation.)

Where can I  learn about international shipping?

You can start by viewing the webinars mentioned above. They give a fairly painless overview of the subject.  If you prefer to read about the subject, check-out pertinent sections of the Basic Guide to Exporting, a free downloadable PDF book, prepared by the U.S. Commercial Service.

Of course, hiring a good customs broker is the most efficient way to ship your goods overseas, and is highly recommended. These companies are expert in documentation, freight rate negotiations and at finding the most economical way to get your product to the buyer. If you are just shipping small samples, or very small and light goods, you can also use one of the courier services like FedEx, UPS, or DHL. They provide freight forwarding as part of their international service.

Your product may be suited only for ocean shipping or for airfreight. It is important to understand the basic principles of both sea and air cargo as rates can vary when new capacity is offered on trade routes and when new markets are serviced, often with a range of inter-modal services.

What do all these shipping terms mean?

Sea and airfreight have a well-established conventions and these need careful study. A good starting point is to learn what are known as Incoterms terms (International Commercial Terms). Introduced in 1936 and modified since, Incoterms are critical for the consignment and payment of goods shipped internationally, and have very precise definitions that apply worldwide.

In addition to the webinar noted above, you can download a free Incoterms Wall Chart (PDF) which provides an easy-to-understand graphic summary of the 12 terms now in use.

Shipping paperwork also references how the order is being paid for, which is covered in the next section on payment terms. The International Chamber of Commerce, which administers these terms, has detailed information on Incoterms. Or, you can buy inexpensive paperbacks online that explain their use and meaning.

How do you negotiate the best freight rate?

An experienced freight forwarder is the key. He or she will provide you with a range of options to find the most cost-efficient rate, however, become familiar with freight markets so you can get the most competitive rate. Also, be aware that if your goods are not on a short delivery schedule, you may find that slower shipping may be cheaper.

Your overseas buyer will often specify the preferred option and this may depend on things like the ease of customs clearance at the destination port or the frequency and reliability of sea ship company.

Transshipment is also a common feature of ocean shipping. ‘Hub’ ports such as Singapore, Hong Kong and Dubai distribute containerized cargo to other ports by ‘feeder’ vessels. Make sure, however, that the transshipment hub is efficient so your cargo does not incur delays.

Most freight forwarders have space and freight rate deals negotiated with sea and air carriers. What’s important is to locate a forwarder who caters for your business profile – both in operating scale and geographic coverage.

Isn’t export documentation a real hassle?

Export documents require careful preparation to avoid delays in customs clearance at their port of discharge and also to comply with payment terms that may specify things like detailed product descriptions, packing lists, quarantine certificates, and certificates of origin. Now days electronic documentation has made the process much easier, but mistakes can still be costly. It is imperative to understand the export documentation process and are careful that the documentation is meticulous accurate.

How can I find customs duties and taxes in overseas markets?

You will need the Harmonized Tariff Code (HTC) to determine the costs for shipping entry into other countries.  Several online sources may be helpful, including those listed on our Export-U website (click here). Your freight forwarder should also also be able to assist. Typically, your overseas customer pays these costs, but they add to the final landed cost, which affects your price competitiveness.

Finding a good freight forwarder

There are tons of forwarders listed in the phone book and online.  Probably the best way to find a good forwarder is by recommendation from other companies you know who are satisfied with theirs. It is also good if the forwarder has experience with the type of product being shipped and/or with your overseas destination.  If you are a very small firm, you might get better attention from a similarly sized forwarder to whom your small account is important.

Again for more information you can click here for 2 videos on the subjects.)