China is the second-largest economy, just behind the US with a total population that is 1.3 billion. If you’re looking to expand your online store, China is an ideal market to pursue.
With a growing middle class, which continues to spend more on imported US items each year, you’ll be able to see many growth opportunities in the event that you begin to market the products you sell to Chinese consumers.
How do you prepare your online business in order to ship products to China? With more regulations and rules in place than many other countries, the process of shipping goods from China through the US is time-consuming, costly, and error-prone especially if you’re running an online retailer with a small or medium-sized company.
In this guide on sending goods from the US to China, You’ll be able to learn about shipping options, regulations as well as transit times, and solutions that can assist you in expanding your e-commerce company in China.
What is the reason why sea freight costs have gone up?
Demand for HTML0 has increased: The most common explanation is that COVID-19 caused the creation of a new demand item produced in China and this has led to an insufficient capacity for shipping which has driven prices up.
A shortage in containers another factor that’s often mentioned is the shortage of containers. Containers were since shippers anticipated the pandemic to reduce demand, not shipped back to Asia. It is believed that this caused the shortage to become more serious.
What are the rates of air freight in relation to COVID-19?
Costs for sea freight result in a ripple effect on air freight since the increased costs for sea freight drive up the demand of the second. The same is true for the cost of air parcels which makes it more expensive to ship product samples and documents.
How do be able to keep track of my freight cost?
You can track the cost of freight through the Shanghai Containerized Freight Index (SCFI) or the Freightos Baltic Index (FBX):
What is the best time to expect freight costs to decrease?
At present, we are able to speculate about the exact time we will expect a decrease in costs. Cost reductions could be caused by the following factors:
- Container capacity has increased
- The capacity of vessels is increasing
- Demand is down
- Government intervention
However, shipping companies like Maersk are having huge profits. It is, therefore, possible to speculate if it is in the shipping companies’ own interest to expand their capacity. The only options are lower demand or government intervention as the only options.
In the near future, authorities across different countries will have to address the issue, since exploding shipping costs (which do not just affect China imports) increase the price of food and daily necessities.
How can we cut down our costs for freight in the event of a pandemic?
At this point, you’re either required to increase your own prices in order to take into the rising cost of shipping, or simply wait for shipping costs to fall.
Factory to Port Transportation
Once the product has been completed and the batch is deemed acceptable by the customer, the vendor must arrange for transport of its storage facility to the closest Port of Loading.
The cost of shipping for the transportation of an FCL 20 container varies from several hundred dollars up to RMB 3000 (Around $480) in relation to the distance. Since the majority of export-oriented companies are located along the coast and thanks to the country’s infrastructure ports are rarely more than a four-hour drive.
Local transportation is part of the cost of FOB. If, as with most importers, make purchases on FOB specifications the cost will be included in the amount you pay by the seller.
The cost of converting the factory is between $50 and 480 dollars (Included in FOB).
China Export Clearance
Before your cargo is loaded and transported it needs to be cleared for export. I don’t have the precise details of this procedure, since these documents are handled by the company or the export agent.
I am however aware of the potential issues that might arise if the documents aren’t produced.
The Chinese Customs Authorities, the “Hai Guan” generally conduct routine inspections on about 10% of all outbound shipments (probably more so for inbound). If a company is discovered trying to export goods without the appropriate documentation, the customs officials might issue a fine by the hundreds of thousands RMB.
All documents for export clearance along with all procedures and documents are part of the FOB rate. Importers should avoid any hassle and instead keep on FOB transactions.
Many buyers believe that they can save some money by purchasing in accordance with Ex Works (EXW) terms which do not cover transport for inland use, nor export clearance documents.
Buyers who for any reason persist in buying under EXW terms can buy the export documents for clearance through a licensed freight forwarder or export agent with prices ranging from 100-200 dollars.
The general rule is that it’s better economical and time-saving to let the vendor take care of this task along alongside an agent for freight.
China Export Clearance: $100 to $300 (Included in FOB)
When I say “Freight Cost” I’m referring to the cost of transportation to and from Port of Loading up to the Port of Destination, in the country of the buyer.
This is the most complicated aspect since it’s in line with the local costs which are paid in the Port of Destination. There are basically two methods of paying freight forwarders:
- Cost of freight is high, but there are low local fees
- Low freight cost, but high local costs
If you are shipping Full Container Loads (FCL) the cost is, according to my personal experience, usually calculated based on the first choice.
The cost for an FCL shipment is obviously dependent on the destination as well as the distance and the volume of cargo. Here are some FCL 20” cost examples of various destinations within Europe, US, EU, Australia, and Asia:
- Shenzhen – Los Angeles: $2,230 – $2,460
- Shenzhen – New York: $2,275 – $2,515
- Shenzhen – Felixstowe (UK): $1,435 – $1,585
- Shenzhen – Hamburg: $1,440 – $1,590
- Shenzhen – Sydney: $685 – $760
- Shenzhen – Singapore: $270 – $295
- Shenzhen – Dubai: $1,445 – $1,595
The cost of less than Container Load (LCL) transportation is a different tale. LCL rates are usually fixed at rock bottom costs that can range from 30 to 40 dollars per cubic meter.
What the forwarder isn’t talking about is local costs, which could be up to five times the amount of the freight cost. In the business, this is known as the “kickback rate” and is quite typical.
Cheap freight costs, but the local fees are extremely high. But importers are sucked into this trap time and again.
In essence, forwarders are compelled to follow these rules because a lot of small businesses that import from China will quickly reject an accurate freight quote because it’s more expensive than a quotation that is based on a kickback.
There are now tools, like this that let you compare prices from various freight forwarders using just a few clicks.
The price of Freight is based on the location and volume, weight, and the destination
I can’t think of one reason why you should not purchase insurance. A lot of companies use low-quality and unprofessional packaging for exports, and very few buyers take the time to set particular quality standards – or even inspect the packaging prior to shipping.
Without insurance, there is no payment is made by the forwarder in the event that the cargo gets damaged during transport.
A majority of forwarders utilize PingAn for insurance of the cargo. The company is charged 0.02 percent, calculated based on 110% the FOB cost. If you purchase goods that are valued at $50,000, the insurance costs will cost you US$110.
This is a fair price I’ll bet you. Based on my own experience the compensation claims are relatively easy to file and insurance companies are generally satisfied with photographs and a list of the value and amount of the items damaged.
Insurance: 0.2% x 1.1 x Cargo Value (Included in CIF)
Document Delivery (DHL or FedEx)
The buyer must pay any additional shipping charges that may arise from the delivery of the Bill of Lading, Commercial Invoice and List of Packing List, and any other documentation required for the transaction, including an A Form A or Country of Origin Certificate.
A FedEx or DHL delivery of these documents can cost you an additional $US40-$US$50.
Document Delivery (DHL): $40 to $50
Port Charges (Port of Destination)
The local costs often come as a very unwelcome surprise for first-time importers. In the past the kickback rate practice between freight forwarders allows companies to provide shipping at a very low cost and the actual profits will be realized upon the arrival at the Port of Destination.
When shipping FCL local charges are calculated per container instead of per cubic meters. I don’t have pricing information for each port, however the prices tend to vary from 500-1000 dollars per container.
But, this is only applicable to FCL. If you are shipping LCL the local fees are calculated based on quantity, which is measured as cubic meters. The prices increase exponentially until an LCL shipment of 15-17 cubic meters is the same expensive in comparison to an FCL 20″” shipping, with the latter having the same volume, 29 cubic metres.
Port Charges: $100 to $450 (Included in DAP and DDU)
Customs Bond (United States)
US businesses that import from China or any other country in the world, have to get a customs bond prior to arriving at the Port of Destination.
Kathy Rinetti, Customs Manager of Flexport.com, explained the fundamentals in an interview that we published in October 2014.:
“Also before the import process, importers need to be able to have an Customs bond in place prior to the time of departure when their goods value above $2,500. In the event that their value falls lower than that, they may import under an informal entry, and without the need for a Customs bond, however, the process will necessitate them to submit manually the necessary paperwork. You can also import with formal entry (with the help of a Customs bond) even if the shipment value is lower than $2,500.
You can get the Customs bond through a variety of Customs brokerages, who typically allow you to buy bonds on behalf of you through surety firms. There are two kinds of Customs bonds – one entry, and continuous entry customs bonds. One Entry Bonds are intended for use only once or Continuous entry bonds are for all your deliveries throughout the course of a calendar year .”
Single entry Customs bond is available at around US$100-$200 and a continuous entry bond for customs is $250-$450. This latter option is ideal for importers who are importing several shipments per year on a regular basis.
Customs Bond: $100 to $200 (Single Entry)
Domestic Transportation (Port of Destination to Final Address)
The last step is to transport the goods to and from your Port of Destination, to your warehouse. The delivery is carried out by rail, truck or a combination of both. The price is contingent upon your distance to the warehouse and on the countryyou live in, therefore I am unable to provide any price estimate.