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Freight basics: getting your products on sail

Freight basics: getting your products on sail

1st December 2017 by Steve Bates

So, you’ve had your eureka moment, created a prototype, successfully raised and then found a manufacturer that can make your product for a price that will still leave a decent profit margin. There’s just one issue: the factory that’s making your products or the area that’s growing ingredients for your food business is thousands of miles away. How will you get the freight to where it needs to go?

We take a look at the things an entrepreneur will probably have to consider when arranging to get the items from an overseas manufacturer to your country – and beyond customs.

Watch out for (unexpected) freight restrictions

As the world continues to get a lot smaller, with items arriving from all over the globe, it can seem like you can easily get anything from anywhere, but there are some pretty peculiar rules on freight in place around the world, including a ban on importing:

  • Car horns into Saudi Arabia – in an attempt to keep noise levels low.
  • Chewing gum into Singapore – to help keep the country clean
  • Clown costumes to Vendargues into southern France – to prevent further panic being caused by people dressing up as evil clowns
  • Dental products into Algeria – because products that include fluoride are seen as poisonous.
  • Kinder eggs into the USA – the seemingly innocuous chocolate egg and toy combo is deemed a choking hazard in America. It now comes with a surprising gift: a $2,500 fine for each egg imported
  • Toothpicks(!) and wheelbarrows into Nigeria – in an attempt to protect local manufacturing
  • Shoes into South Africa, Mexico and India – to boost shoe manufacturing locally, imports of matching pairs of shoes are banned

As well as looking out for unexpected importation regulations, it pays to be aware of products that will trigger surprise fees.

Clearing Customs

Customs generally control a country’s borders, so you must be sure that your goods will be able to clear them. For example, from time to time, importers have products shipped to the UK, only for Trading Standards or Port Health Officers to deem them not fit for this market.

And, if the goods can’t be allowed into a country, the importer will often either have to pay to have them destroyed or pay to have them shipped back to wherever they came from. Either outcome represents a lot of wasted time and money.

So, before you attempt to import anything, let alone export anything, perhaps it’s a good idea to take a look at this handy checklist:

  • Do you need an import license for your products?
  • Is the product subject to anti-dumping duty?
  • Will you need a certificate of origin?
  • Do you require test certificates? (usually needed for electronic goods)
  • Will the product pass product safety?
  • Will I have to pay Duty and VAT?

Test the waters first

Before you start attempting to import containers full of product into your country, it’s a good idea to have the factory send you some samples first. If the samples are fine (or need a little tweaking) perhaps you could request a trial order of just a few boxes of the product. If all is still OK, it may be time to scale-up your order to full shipping containers. But it would be wise to check that the quality of the product still matches expectations when you order it in larger amounts.

If you’re importing lots of small and lightweight items, express air cargo may be the way to go, but bulky and heavier items may well be best to transport via sea shipping container.

Engaging a freight forwarder

You may be tempted to agree if the manufacturer of your product offers to include shipping, but tread very carefully. The chances are that the price won’t be particularly good value and may be seen by the manufacturer as an opportunity to increase their profits.

Instead, it’s probably a good idea to try and get recommendations from your contacts who have organised shipping/forwarders in the past and get plenty of quotes. Consider if it’s cost-effective to use air freight (best for a shipment of 1,000 pounds or less – and certainly quicker) or best to have the products come by sea.

Before you start talking to forwarders/shippers, it will probably useful to get the following details together – your supplier should be able to help:

  • Supplier and buyer contact details + pickup and final delivery address
  • Weight/dimensions of each box/pallet
  • The total value of the goods and shipment date
  • Product description

Learn to speak the language of freight

The forwarders will almost certainly ask about the terms of sales you’re dealing with, often known as incoterms. Some of the most likely freight terms you’re likely to come across are:

  • Ex-Works (EXW) – The forwarder arranges for shipping from the manufacturer to your premises, and is responsible for insuring against loss all the way
  • Free Carrier (FCA) – The seller arranges delivery from their premises to a transport hub, typically an airport or port. The risk of loss of goods is with the seller but passes to the buyer as soon as the goods are passed to the carrier.
  • FCL – Full Container Load
  • Free on Board (FOB) – The price quoted by the seller includes all transport charges up to placing the products on a ship at the port chosen by the buyer, for example, FOB. Shanghai.
  • FTL – Full truckload
  • LCL – Less than a container load.
  • Lift on/Lift off The carrier will move a full carrier load onto a lorry and then take it off the lorry at a specified destination.

Take cover!

Many carriers will provide a basic level of cargo insurance, but check what it covers because you may find it inadequate if your cargo runs into trouble. You may decide it’s best to take out comprehensive insurance for peace of mind.

Paperwork and clearances

Once the forwarder has been appointed, they should control the paperwork and documentation as well as the clearances you’ll need. This can be quite complicated and may involve multiple carriers and many customs controls. Imagine tracking a shipment across the world and then be sure to use a forwarder rather than trying to organise the shipping process completely by yourself.

Then it’s ‘just’ a case of selling the goods, processing the payments and fulfilling your orders.

Steve Bates

Steve Bates

Content Team at Seedrs

Digital Agency Kent