Shipping and importing products

Shipping and importing products is a big topic.  Today I’ve brought in an expert to help us out.

Simon Arnold joins us from Unity Logistics – a UK based freight forwarding company specialising in shipping goods internationally to and from the UK, including importing and delivering goods directly to Amazon warehouses in the UK (or wherever required) on behalf of Amazon sellers.

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What do we mean, when we talk about shipping?

Once you’ve found a supplier, shipping is the next point in the chain.  It’s about actually getting your goods to wherever youI need them to go. There’s quite a lot of processes that actually take place within the international shipments. 

What are Incoterms and what does each one mean?

Incoterms is an abbreviation for International Commercial Terms.  They set out, on a legal basis, who is responsible for what aspects of the shipping process, whose risk is it at which parts in the shipping process and who is paying for which costs in the process. 

Ex Works

Ex Works is one end of the spectrum where the buyer is responsible for absolutely everything door to door – all the risks and all the costs, from the moment the goods leave the factory. If you agreed Ex Works terms with your supplier, even from the point that your supplier is loading those goods onto a collection vehicle, you as the buyer are responsible should something happens to those goods.

FOB

FOB terms is somewhere a little more in the middle where the the seller (your supplier) would be responsible for submitting the export customs clearance for whatever country the goods are coming from. They’re also responsible for delivering the goods to the port of export, which you would presumably have pre-agreed with them. 

When we say port, in most cases, we don’t mean a physical port, but instead, probably a warehouse in the vicinity of that port, where they collate goods to consolidate to ship them together before they reach the port of export. From that point, the freight forwarder would then be the one responsible for taking these goods and moving them to wherever they need to go. 

How to get supplier quotes you can compare

I think it’s worth knowing that depending on what terms your supplier quotes you on, they’ll give you a different price. Generally, if you ask for Ex Work terms, they’re slightly cheaper, for example.

This is because they can quote you a cheaper price for your products, because they’re not paying for any shipping costs. Rather than itemise it out, they’ll factor in the shipping cost (to the port) if they give you an FOB price. 

If you’re getting quotes from multiple suppliers, you just want to be sure that all of them are quoting you on the same terms because otherwise, you’re not really comparing like for like.

What to watch out for with DDP shipping

The seller can essentially hide what they’re doing with the paperwork. They can under declare the value of goods, or they could mis-declare them, because you can’t see what’s going on. They could be taking huge shortcuts that save costs, but could come back as a risk to you later on. 

Most people will be fine, it’s very unlikely this will happen but, if it did, the cost of that could be quite severe. HMRC could turn up, at any point, and ask to see your paperwork. In most cases, when people ship on DDP terms, these customs documents never present themselves. But UK Customs have a right to say “you brought the stuff in, and you can’t prove that you’ve paid the tax on it. So we’re going to charge you the tax on it now.”

You’re obliged, as an importer, to keep records for compliance, so be sure you ask for them – and get them!

Do you need to pay for insurance for your products while they’re in transit?

This is something I recommend you take out, as if something happened, and you don’t have an insurance policy, what you’d be entitled to claim against  your losses would be very little. If you have  insurance you could claim up to the full value of the of the loss. 

The insurance will cover for pretty much anything that could happen in transit.  The main thing it doesn’t cover is insufficient packaging if the goods have just not been suitably packed at all. 

How do import charges and VAT work? How can you find out what the costs will be?

The big drawback of DDP is that it because it includes the import taxes it creates a  blurry figure. You don’t really know what’s in there. It’s much more straightforward if you can keep the import taxes separate to the shipping costs. 

To calculate what your import taxes are going to be before your products arrive, the starting point is to find out the commodity code for your products. I’d start by asking your supplier. It will be a 10 digit code, which you can look  up on the commodity code database and it will tell you what the VAT and duty tax rates are. 

Once you know that, you can calculate what the import VAT and duty will be on your goods. Very roughly it’s a percentage of the cost of the shipping, plus the value of your goods at cost price. 

Who pays for these and when?

The import taxes should always be paid at the point of entry, so when the goods arrive into the country.  That’s when the data gets submitted through the customs software and it will generate the exact amount of VAT and duty to pay. 

In most cases, it will be a freight forwarder or a courier company who pays for it and they’ll then invoice you. 

What’s an EORI number and do I need one?

The easiest way to think of it is as your customs ID number. It’s a number to identify you as an importer, so that you’re authorised to import and export goods to and from the EU.  Without it, you can’t import or export goods because the customs system just won’t recognise you. 

That will change when Brexit comes in and it will then be imports to the UK specifically. 

The process for applying one is very straightforward. It takes about 10 minutes to complete (you can apply here), a couple of days to generate a number and that’s then yours forever.

If you can, get it included on any sort of documentation that goes with the shipment, as that’s also very helpful.

What are the different modes of transport you can use to ship your products and what are the main differences between them?

Generally you’ve got the choice between air and sea, if you bring stuff in from China. Typically sea is slower and cheaper air is quicker and more expensive. Rail was designed to be something in the middle, where the transit time is kind of in between air and sea and the cost is somewhere in between too.  As a company we don’t offer any rail services, as we just found it didn’t really give people much value for money.  The costs were much more than sea shipping, but the transit times weren’t any quicker.

I think sea freight is the way to go if you can manage your stock levels with the lead times that sea offers. The quickest we could get something door to door by sea is about 42 days.  That can go up to around 55 – 60 days, depending which port it’s coming from.  Times are getting slower right out.

It’s exactly the same with Air.  We used to get your stuff door to door within 7 to 10 days. Now it might be more like two or three weeks.

What do you need to know to get an accurate quote from a freight forwarder? 

The more information we can be provided with the better. The more accurate the information that we get, the more accurate the quote we can give.

We need to know where we’re delivering from and to, how many boxes there are with weights and dimensions. That’s really all we need.

It does help us though if people give us a bit more information like, this is what my product is, this is the value of it, this is the commodity code, because then we could also give you an idea of what your insurance costs and import taxes would be.

Is it  best to work with a freight forwarder, rather than letting your supplier arrange all the shipping for you?

If you’ve got a good supplier, and they’re doing things properly, there’s no reason why you shouldn’t use them to ship the goods. But I do think it’s always going to be beneficial to just have someone probably in the same country as you that you could speak to if you’ve got a query. 

Particularly with the custom side of things. If there’s a problem with UK customs, it’s best if there’s a UK contact who can handle it, rather than having to go back to your supplier in China to resolve it.

Is there anything you need to be aware of if you’re sending products into Amazon FBA?

The main thing is because we have to deliver in accordance with Amazon requirements it takes more time and there can be extra cost involved.

Also, at the moment, Amazon have a cap on the number of units they’ll accept (currently 200), so you may need to only send in that amount and store the rest of your products to drip-feed in at a later date.

If you’re looking to ship to Amazon, it’s a good idea to set up your Amazon shipping plan as soon as you can, so you know how many units you can send and you can plan what you’ll do with any remaining stock.

You can actually leave deciding when and where you’ll ship your stock to, until just before your goods arrive in the UK, providing your freight forwarder knows that and you’re happy that this means you won’t be able to have an entirely accurate shipping quote until this is known.