A Simple Guide to Shipping from China

container ship

By John Hawthorne 2017-07-09 19:37:30

Shipping from China is a fantastic way to get resellable goods at a discounted price. When you’re a dropshipper and/or Amazon seller, goods from China can be your ticket to significant revenues.

But here’s the problem: the process of shipping goods from China isn’t particularly easy to understand, primarily because a host of strange and unfamiliar terms are used. It’s like trying to learn a foreign language.

This learning curve often turns potential importers off, with them assuming that the process is too difficult to understand. But once you understand the terms used, the process isn’t that complicated.

In this guide, we’re going to give you a simple walkthrough of shipping from China. We’ll unpack the terms in simple English so that you feel confident navigating the shipping world.

Term #1: Incoterms

Inco…what? You probably don’t use that word often, or ever, in your daily life. However, it’s used constantly in the shipping environment, so you need to understand it.

Incoterms are international standard codes that indicate where cargo shall be shipped from the supplier to the importer.

One common incoterm is DAP (“Delivered At Place”). This simply means that your cargo will be shipped from the supplier in China to a specified overseas location. If you’re in Wisconsin and are having blue widgets shipped from a supplier directly to your warehouse, you would use the code DAP.

Another common code is FOB, which stands for “Free On Board”. This means transportation from the supplier to the port of export. However, you are responsible for arranging transportation to it’s final destination.

For example, you might have whatchamacallits shipped from the supplier to port of Hong Kong. From there you need to determine how it gets to your warehouse in Wisconsin.

A full list of incoterms can be found here.

Always be sure to tell your supplier what incoterm you want when getting a shipping quote. Otherwise you may end up paying way more than you expected.

To recap: Incoterms are the codes that specify how the goods are going to be transferred from the supplier to you.

This short video explains more of the what and why behind incoterms:

Term #2: FCL and LCL Shipping

 
Now we come to FCL and LCL shipping, both of which have to do with the costs of shipping and the size of the container used.

FCL = Full Container Load
LCL = Less (than) Container Load

Depending on the amount you are purchasing from your Chinese supplier, you may fill an entire shipping container or only part of one.

When you are using an entire container yourself, you are shipping FCL (full container load). See, that makes sense, right? More items equals a full container. Typically, shipping FCL is cheaper by volumetric unit and weight unit.

But, many importers aren’t purchasing enough goods to ship FCL. You could try air freight but the cost is often too high. In this case, LCL (less than container load) is the ideal solution.

When shipping LCL, your items share containers with other items. In other words, cargo from multiple buyers ends up in the same container. Although this gives you a cheaper total price, is does end up costing more per volumetric unit.

Ultimately, your choice of FCL or LCL will hinge upon how much you’re shipping.

As Cargo From China notes:

You can choose FCL or LCL as you wish. But there’s a basic rule you should follow.

If 1cbm~8cbm, choose LCL;

If 8cbm~15cbm, choose FCL or LCL based on practical situation;

If over 15cbm, choose FCL without any hesitation.

Term #3: Shipping Container Volumes

Typically, there are four options when it comes to shipping containers:

FCL 20 feet
FCL 40 feet
FCL 40 feet HQ
FCL 45 feet HQ

As Cargo From China notes:

20 foot is designed to carry more weight than voluminous cargo.

Example – minerals, metals, machinery, etc. all of which are heavy goods.

40 foot is designed to carry voluminous cargo rather than heavy cargo.

Example – furniture, tires, clothes, etc. all of which are voluminous goods.

If you are able to shape your order based upon how many units will fit in a specific container size, you may be able to save quite a bit of money.

Term #4: Freight Insurance

 
Freight insurance is exactly what it sounds like: insurance on what is being shipped. If something goes wrong and your cargo is hijacked by fierce pirates, freight insurance covers your losses.

The incoterms specifies who is responsible for insuring the shipments. Insurance is automatically included with the incoterm CIF (Cost Freight and Insurance). If you’re using the incoterms DAF or DAT, you have to tell the shipping company that you need insurance on your cargo.

Thankfully, insurance isn’t usually expensive, usually between $50-$100.

Term #5: Shipping/Lead Time

This one is also pretty self-explanatory. The shipping/lead time is how long it takes to get from the shipping port to the port of destination.

This matters because the longer the lead time, the earlier you need to place your order. If you need to receive your shipment by May, you need to place it several months prior.

Some examples of lead times include:

U.S. and Canada (West) – 20 days
U.S. and Canada (East) – 30 days
Western Europe – 25 days
Northern Europe – 30 days
Southern Europe – 27 days
Australia – 15 days
India – 15 days
Southeast Asia – nine days
Eastern Africa – 30 days

If you want to calculate your shipping time, you can use this rate calculator.

Keep in mind, lead time doesn’t just include when the cargo is being shipped. It also includes:

The time your cargo sits in the port before being loaded (up to one week).
Administrative delays at both ports
Weather related delays.

The point is simple: shipping by sea is somewhat unpredictable. Give yourself a large margin of error when placing your orders.

Term #6: Export Packaging

The last thing you want to happen is for your cargo to be damaged during transport. Damaged cargo leads to lost sales and plummeting revenue. It’s crucial for you to know how to package your cargo.

It’s also essential for you to be crystal clear with your supplier, since they may not adhere to your standards. It’s not uncommon for suppliers to use cheap packaging materials, which can then lead to breakage.

China Importal provides a helpful checklist for shipping:

Inner cartons: 5 layers
Outer cartons: 5 layers
Plastic wrapping: Yes (on Outer carton)
Pallets: Yes (ISPM 15 EU Standard)
Freight remark: Yes (Printed on outer carton)

Again, be clear with your supplier. Don’t leave things ambiguous. If possible, provide illustrations of how things should be packaged.

Additionally, if there are any additional regulations to consider (such as with lithium batteries), be sure to specify those as well. Failing to follow those regulations can lead to penalties and delays.

Term #7: Amazon FBA Warehouse

These days, it’s common for importers to ship directly from China to an Amazon FBA warehouse. From these warehouses, Amazon handles all the distribution of the products.

So, for example, if you’re selling essential oils from China on Amazon, you could have them shipped directly to an FBA warehouse and then Amazon would handle the shipment of all your sales. This can save you time and shipping costs.

But here’s the deal: Amazon has pretty strict regulations for receiving packages at their warehouses.

Everything must be labeled according to Amazon’s standards.
Everything must be on pallets.
Everything must be forwarded to the Amazon address using DAP and DDP incoterms.
If you fail to meets these specs, you’ll run into problems.

Term #8: Bill of Lading

The Bill of Lading functions as a checklist of sorts. It shows:

The shipping company
The exporting company (seller)
The buyer
The products being shipped
The volume of the products
The incoterm used on the products

When shipping from China, a Bill of Lading is mandatory and always must accompany the shipped goods.

For more on the Bill of Lading, watch this video:

Term #9: Container Tracking

As mentioned above, there is some unreliability when it comes to shipping overseas. Shipments can be delayed, throwing a monkey wrench into all your best laid plans.

Tracking your containers is the best way to stay on top of when your shipments should arrive. In order to track your containers you need:

The shipping line transporting your cargo
The container number, booking number, or document number
You can find all this information on your Bill of Lading.

Once you have this info, you should be able to track the progress of your shipment.

Conclusion

See, it wasn’t that complicated!

Yes, the terms may be a little confusing initially, but once you’re familiar with them, everything fits together nicely. Don’t be intimidated. With just a little bit of time and effort, you can become well versed in shipping.

Source: Floship

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.