For e-commerce sellers, there are few things more confusing than international freight, especially for businesses just getting their feet wet. But it doesn’t have to be. We believe that it’s important for you to understand, but DON’T WORRY – WE DO IT ALL FOR YOU.
Here’s what you should know about international freight before you begin your first shipment.
In this article we will cover the following points:
- Incoterms (Otherwise known as shipping jargon)
- Modes of Shipment
- What you Need from your Supplier
INCOTERMS or International Commercial Terms
INCOTERMS or International Commercial Terms
developed by the International Chamber of Commerce and widely used in international and domestic contracts for the sale of goods. They are accepted worldwide by governments and shippers for the sake of preventing misunderstandings.
On speaking with our customers, we have learned that one of the most daunting aspects of dealing with shipping and logistics, is our very special language. For we who live it every waking hour of every day, it all makes perfect sense but for the layman, it can be a minefield of misunderstanding.
* The seller is the supplier and the buyer is you!
1. TERMS FOR ANY TRANSPORT MODE
Each of these seven terms must specify the port or destination.
CIP – Carriage and Insurance Paid TO (named place of destination)
The seller pays for moving the goods to the destination. From the time the goods are transferred to the first carrier, the buyer bears the risks of loss or damage, but the seller pays for the cargo insurance.
CPT – Carriage Paid TO (named place of destination)
The seller pays for moving the goods to the destination. From the time the goods are transferred to the first carrier, the buyer bears the risks of loss or damage.
DAP – Delivered At Place (named place of destination)
Delivery takes place when the seller places the goods at the buyer’s disposal on the arriving means of transport, and when the goods are therefore ready to be unloaded at the named place of destination. It’s best to be as specific as possible about the exact point within the place of destination, because that’s the point where the risk transfers from seller to buyer.
DAT – Delivered At Terminal (named place of destination)
The seller delivers the goods when they have been unloaded from the arriving means of transport and placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes quays, warehouses, FBA warehouses, container yards, or road, rail or air cargo terminals. The seller and the buyer should agree to the specific terminal and, when possible, the point within the terminal at which the risks will transfer from the seller to the buyer of the goods.
DDP – Delivered Duty Paid (named place of destination)
The seller delivers the goods which have been cleared for import to the buyer at destination. The seller bears all costs and risks of moving the goods to destination, including the payment of Customs duties and taxes.
EXW – Ex Works (named place)
The seller’s only responsibility is to make the goods available at the seller’s premises. The buyer bears the full costs and risks of moving the goods from there to the final destination. EXW means that a seller has the goods ready for collection at his premises (factory or warehouse, for example) on the date agreed upon. This term places the greatest responsibility on the buyer and minimum obligations on the seller.
FCA – Free Carrier (named places)
The seller delivers the goods that have been cleared for export to the carrier selected by the buyer. The seller loads the goods if the carrier pickup location is on the seller’s premises, i.e., truck. From that point, the buyer bears the costs and risks of moving the goods to destination. This is the “freight collect” term that should be used for sea shipments in containers, whether LCL (less than container load) or FCL (full container load).
2. MARITIME-ONLY TERMS
CFR – Cost and Freight (named destination port)
The seller clears the goods for export and pays the costs and freight to the named port of destination. The buyer bears the risks of loss or damage.
CIF – Cost Insurance and Freight (named destination port)
The seller clears the goods for export and pays the costs, cargo insurance, and freight to the named port of destination. The buyer bears the risks of loss or damage.
FAS – Free Alongside Ship (named loading port)
The seller delivers the goods to the named port of shipment. From that point the buyer bears all costs and risks of loss or damage. This term is only used for maritime transport but it’s not used for multimodal sea transport in containers. It’s typically used for heavy-lift or bulk cargo.
FOB – Free on Board (named loading port)
The seller delivers the goods on board the ship and clears the goods for export. From that point the buyer bears all costs and risks of loss or damage.
So, now we have that out of the way, we can continue.
Palletization: When to Use Pallets for Shipment and Which Shipping Pallets to Use specifically for Amazon Shipping
Palletizing your shipment will protect goods against damage or loss and will make the shipment easier to transport. These portable platforms are customarily made of wood or plastic and weigh between 20 to 70 lbs.
Air Freight: Due to their weight, pallets will increase the cost of shipping through air freight. When shipping by air, it is best to palletize after customs clearance.
Ocean Freight: The cost of shipping cargo through ocean freight is not driven by weight to the same extent and you can have the shipment palletized at the factory.
We recommend a quality inspection be carried out for all sellers.
Depending on the country, your supplier may need to provide you with a fumigation certificate when using pallets.
If you are an Amazon Seller then, when working with a new supplier it is important that they understand the Amazon TOS (Terms of Service) as regards pallets and packaging. You can find this information here:
Choosing the Best Mode for Your Shipment - Express, Air, or Ocean Freight
The 3 freight modes that we need to consider are express, air and ocean freight.
Express Freight (International Courier)
For small shipments only.
Shipping is streamlined (even customs) so you can bring a small first shipment, for instance, if it’s important for you to have it in stock at Amazon very quickly.
Air freight processes are more complex and less automated than express freight. Not every kind of cargo can be sent by air freight.
Ocean freight reliability is improving but it is still more prone to delays due to port congestion, customs holdups, bad weather, etc. Therefore, ocean freight is a more risky choice if you have a hard deadline. Some ocean carriers offer a premium service. “Expedited freight” which works by streamlining processes and only tying in with faster ocean and trucking services.
How do I choose which mode of freight to use?
It’s all a question of time versus money.
As an indication, the following are estimated times are for China to US door to door.
Premium Express Freight (1-2 days)
Express Freight (3 days)
Premium Air Freight (5-8 days)
Air Freight (8-10 days)
Premium (Expedited) Ocean Freight (18-30 days)
Ocean Freight (Expedited) (30-40 days)
Each mode has a different fixed cost/variable cost (variable by weight) ratio. So the cheapest method will largely depend upon shipment weight. Here’s a rough guide:
Express Freight is cheapest for shipments less than 50 kg.
Air Freight is cheapest between 50 kg and 500 kg.
Ocean freight is the better choice if your cargo weighs more than 500 kgs.
What Do You Need from Your Supplier?
- Shipment’s dimensions and total weight
- Packing list
- Certificate of Origin
- Commercial Invoice
- Material Safety Data Sheet – This document is only required for shipments containing potentially hazardous products
- Fumigation Certificate – Customs may require this document, depending on the product/pallet and country
At Rosenthal Logistics Services we consider it an honor to make your logistics and shipping experience as easy to understand and worry-free as possible.