Tips To Reduce Freight Costs When Importing From China
Shipping costs are one of the biggest expenses when importing products from China to South Africa. With increasing costs of transportation traders would be needing to find any way possible to reduce these costs wherever possible.
In this guide we offer some tips for South African importers to reduce shipping costs by choosing the right transportation method, using the correct Incoterms, consolidating shipments and working with experienced freight forwarders. This helps you to keep your shipping fees as low as possible and avoids hidden fees along the way. This will help you gain control over your expenses, reduce costs on shipping, and ultimately help you to have cost-effective, smooth processes in your shipments from China.
Shipping Methods: Maximising Your Options
There are different ways to ship your goods from China: by courier, sea or air. Which you choose depends on your shipment, where it’s going to and from, and your needs regarding costs and speed. It is vital to explore the different options by looking at what your needs are in order to get better control over your costs, and do what is best for you and your business. Often combinations of each form of shipping is necessary, and also knowing what would be the best combination is valuable.
- For large shipments that are not urgent, it is more cost-effective to use sea freight. Sea freight allows you to ship in bulk for a lower cost per item as fees are charged over large volumes. If you plan your stock flow well ahead of time and are not urgently needing a shipment, then sea freight is a great option as there are lower costs charged than faster methods.
- For urgent, medium-sized shipments, air freight is a good option. The costs are lower than with couriers, but still gets the shipment delivered in a few days.
- For urgent, small shipments, it is best to use a courier. The costs are high with this method, but they generally offer door-to-door service that can be done in a very short space of time. This option is suitable if you need to get samples delivered or critical items delivered urgently.
There are different strengths to each type of transport that is dependent on the size and the urgency of the shipment. Choosing the right one based on your needs, the size of the goods being shipped, the budget and how urgent the shipment is can help you to keep your costs as low as possible.
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Incoterms: Choosing The Right Ones For Your Needs
Incoterms determine who is responsible for what costs and duties are involved in shipping. Understanding the Incoterms and how to use them effectively can help you to avoid certain costs involved in a shipment. Choosing the right ones help you to have control over what you are responsible for paying for. There are several different options, so it would be wise for you to know how they function. Here are some of the most common ones used:
- Free on Board (FOB) – this means that the supplier (the exporter) covers all the export costs within the export country for a shipment, but once the goods leave the exporting country then the buyer (the importer) is responsible for the costs at the destination. This then allows the buyer to have more control over costs as it gives them the flexibility to choose their own freight provider. This is a good option for buyers wanting some control over freight choices and costs.
- Ex Works (EXW) – this means that the buyer is responsible for all transportation and costs once the goods are prepared at the facility. This Incoterm puts more responsibility on the buyer. This is a good option for buyers who want to have full control over the full shipping process.
- Cost, Insurance, and Freight (CIF) – this Incoterms puts most of the shipping cost responsibility on the supplier. They are responsible for managing shipping and insurance costs as far as the destination. Once the goods are at the destination any further costs are the responsibility of the importer, CIF puts the least amount of control in the hands of the importer as it limits their ability to negotiate shipping costs.This is a good option for buyers who want the suppliers to manage freight for simplicity, and then to manage only local customs and delivery.
There are many other Incoterms available for different shipping needs. It is worthwhile to learn them and find which suits you best.
Freight Forwarders: Tips To Reduce Costs
There are several ways that you can also reduce costs of transport using freight forwarders. There are a few different methods you can use to do this to help you get the best price possible for your shipment. This can include:
- Compare quotes from different companies and the different services that they each offer. Doing this can help you get the best rate possible for your shipment.
- If you plan to do regular shipments with consistent volumes you might be able to negotiate better rates with your selected company. If you are able to do this then it would also be worthwhile to consider doing a fixed contract with the company which helps you to secure those better prices and protect you from price fluctuations.
- Consolidating smaller shipments into larger, but less frequent shipments could help to reduce your costs per unit instead of doing frequent, but smaller, shipments. It is usually more cost-effective per unit to do Full Container Load (FCL) shipments compared to Less than Container Load (LCL) when doing larger shipments. LCL can tend to have extra handling and documentation fees, which can add onto the costs.
- Package goods with lighter, and more compact packaging to reduce weight and space.
- Use a freight forwarder that has value-added services such as warehousing. Utilizing these added services with the same company will likely be more cost-effective than using different companies for these different services.
- Ask for a clear breakdown of fees from your freight forwarder. This can help you to have more control over the costs involved in your shipment and help you to avoid hidden fees.
- Research to find out if there are any reduced duties or free trade benefits offered. China has free trade agreements with several countries, including South Africa, which you can harness to reduce your import duties, and therefore your overall costs. Some goods may qualify for reduced duties. Your freight forward may be able to assist you in finding these out.
These different methods can help you to reduce costs in different areas of the transport process, and save you money ultimately.
Packaging: Reduce Costs By Optimizing Packaging
Packing goods can really make a difference to your costs. If cargo is packaged loosely or in too many unnecessary layers of packaging it can mean that you take up more space and weight in a container and need to pay for it. If you can optimize your packaging, but without compromising the safety of your goods, then you will likely be able to cut shipping costs because you will be able to fit more units into fewer containers.
It could help to work with your supplier in order to consider the packaging to align more with container dimensions. An alternative would be to consolidate smaller shipments into one container in order to lower the costs per unit. Grouping several shipments together can drastically reduce expenses, and also simplifies your processes.
Quote Comparisons And Building Relationships
When planning on doing shipments from China, it is worthwhile to consider several different options from different companies in order to get the best rates possible. Start by requesting multiple quotes from different services to get the best rates available. Asking for a detailed breakdown of charges on a quote can help you to have better control over your charges, and may help you to negotiate a better rate.
Investing into strong relationships with carriers can also benefit you because they may offer you better rates and exclusive discounts over time. Building these relationships with a company makes it a lot easier to get better rates in the long-run, and therefore helps you to get better terms and improves your profits.
Conclusion
Shipping can be a very expensive process when importing from China. However, there are various methods you can use to reduce these costs and save yourself money. Some ways to do this are through considering transportation methods, the Incoterms used in agreements, and even improving your packaging in order to maximise space. Careful planning and research can really help you to keep your costs down and give you greater control over what you spend your money on in your shipments from China.
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