In addition to the costs involved with your choice of shipping method, here are some other factors and potential costs to consider when choosing your logistics provider.
1. Terms of Trade
Incoterms 2010 (or International Commercial Terms) are a set of commercial terms designed to aid international trade by clearly defining the responsibilities of both buyers and sellers. Incoterms help eliminate any confusion between buyers and suppliers by clarifying which party is responsible for delivery, risk and costs associated with shipping. When comparing costs of logistics providers, make sure that the terms are agreed upon and then quoted on your invoice.
Here are some Incoterms you should know:
- Ex Works (EXW) indicates that the buyer will bear all of the cost and risk involved in the transfer of goods from the seller's site to a desired destination.
- Deliver Duty Paid (DDP) means that the seller is responsible for delivering goods to a named destination and covering duties, taxes and customs charges.
- Free on Board (FOB) applies to sea freight and means that the buyer is responsible for all costs and risks from the port of export.
- Cost, Insurance & Freight (CIF) applies to sea freight and means that the seller pays all costs, insurance and freight to a named destination.
FOB and CIF are the most commonly used Incoterms among Alibaba.com buyers and sellers.
Exporters may provide insurance automatically, but Incoterms 2010 help clarify when risk transfers from the seller to the buyer. You may also want to consider purchasing Cargo Insurance to cover damage to, or loss of, goods in transit.
3. Customs Clearance
Rules and processes vary greatly across the world when it comes to duties, taxes and sales tax (VAT) being applied at the point of import. Your carrier will advise you on the appropriate paperwork needed for export and import. At the very least, this will include shipment value, product description, VAT number, and including the terms of trade on commercial invoices.
Depending upon the transportation method you have selected, you may need to find a customs broker to clear the goods on your behalf. However, most carriers will either recommend a broker or provide this service directly.
Researching import duties in advance has the advantage of giving you a "landed cost" (the cost of the transaction plus the duties and local taxes applicable to that import), which ensures you don't get any unpleasant surprises when the goods arrive. In fact, this step is essential if you plan to sell the products in advance of their import, or are researching the viability of importing certain products. Many nations have trade agreements that provide preferential import tariffs. These will be included in the landed cost calculation. Many carriers will handle payment of duties on your behalf, but they will charge a fee for doing so.
When an item is restricted, it means that customs controls the flow of these goods into and out of a country. Items may be restricted from leaving one country or from entering another. Restrictions may apply either to the type of goods being imported or to their potential use. Goods may be restricted due to the potential to cause harm (i.e., tobacco products, weapons or harmful chemicals) or because of national quotas, tariffs or embargoes. It's important to ensure your goods are not on the restricted list. If they are, then you may need an import license. Your carrier will be able to advise you on restrictions and prohibitions, but the ultimate responsibility lies with you.
5. Warehousing and Storage
The cost of warehousing and storing your goods before departure and upon arrival will depend on both the size and volume of your shipment and the method of transportation you have selected. Most carriers will provide short-term storage at reasonable costs, in both the country of origin and the destination country. Many provide bonded warehouses, which ensures that duty and taxes will not be payable until the item leaves the bonded facility. Bonded facilities are commonly used for goods that are subject to excise taxes.