I recently met with Sandra Nguyen Thanh, who works for Karl Gross Logistics, a freight forwarding and logistics company with offices in Europe and in China.
Sandra was kind enough to respond to my questions. Here are some of the basics every importer should understand about freight forwarding.
Q: What is the most common incoterm for sea freight? And for air freight?
There is no one answer to this. The choice of an incoterm is a crucial question in international trade and depends on what the parties involved negotiate.
Key questions are: Which party wants to have the decision on ways and means of transportation in its hands, up to how far along the way of transport (including bearing the costs)? And which party is taking the risk for the cargo, up to how far along the transport way (including the costs involved)?
Terms we often come across for exports ex China are FOB – Free on Board, CFR – Cost and Freight and DAP – Delivered at Place.
Q: Let’s say I buy some products (under EXW terms) in China for the first time, and I need to get them physically in my company’s warehouse in Germany. What can a freight forwarder do to help me?
The freight forwarder can and should be your “consulting, connecting and organizing party”. He should step into a dialog with you. One basic question is of course: When do you need your goods to arrive in your warehouse in Germany?
Yet, there are numerous other dimensions involved. What we do is find out what is important to you. What are your individual needs and requirements, what are the cargo specific requirements? Then we work out an individual transport solution. For us, this includes more than just organizing that your goods get from A to B safely. That is, we may give assistance on what documents are needed and how they need to made up e.g. for smooth customs clearance. Depending on what you plan on doing with your products in Germany, we may show you options for fiscal clearance such as fiscal representation which might be attractive for you in terms of enhanced cash flow.
Another important point is: we take care of a good part of communication for you! We step into contact with your supplier to find out when your cargo is ready for shipment and keep you updated all the while.
In short: a freight forwarder can and should save you time and money.
[Renaud's note: see more details about this in the comments section].
Q: Let’s say I want the products to be shipped by sea. They only represent 8 cubic meters, and they are not dense (the limit will be their weight). What is the appropriate manner to bring them from the Chinese port to my country’s port?
From what you have sketched here, we would recommend to ship your cargo in a consolidated container (LCL). It is the best option if there an LCL connection which suits your demands and your cargo, and if it is more cost-effective than loading your cargo into a container reserved just for you (FCL).
Q: How are import duties calculated? Can my freight forwarder look up the percentage to pay, for me? And is this percentage calculated on the FOB price?
1. Yes: If you provide us with the HS Code(s) of your commodity/ies, we can look up the percentage of import duties you have to pay in your country of destination.
2. No: The percentage is not calculated on the FOB price. It is calculated as follows: (Cargo Value + Transport Charges) x duty percentage.
Q: Let’s say the supplier ships the goods out by sea, under FOB terms. But he doesn’t send the original documents (commercial invoice, packing list, certificate of origin, bill of lading, and any other required form) in time. What are the consequences for the buyer?
Accurate and complete documentation is crucial. If this is not given, you may have to cope with delays, fines or even loss of cargo.
That is why close communication with all parties involved is so important. Both parties, buyer and supplier need to contribute in order to allow for smooth international transportation. The freight forwarder should be the connecting party in this.