Every importer wants to spend as little as possible on the sea freight transport of their goods. There are so many costs involved in importing from manufacture and transport to customs duties, taxes, road transport and storage. Many costs are fixed but transport costs vary. With some understanding of the shipping industry and careful planning, you can make considerable savings on your freight from China to Australia.
7 Ways to Reduce the Cost of Shipping
By following these simple tips you can pay as little as possible for transporting your goods.
#1 Avoid Busy Shipping Times
The cost of sea freight varies based on supply and demand. The more demand for space on ships, the higher the price you can expect to pay.
During busy times of the year, it costs more to move your goods from China to Australia. From October, the volume of freight increases worldwide due to Christmas stock being transported to Western countries. Whether your business needs stock for Christmas or not, try to manufacture and transport your goods before the rush begins so you aren’t competing with the retailers for a container.
Chinese New Year Shut Down
Chinese New Year occurs in late January or early February. Factories throughout China wind down one to two weeks before celebrations begin and remain closed for seven to 10 days. Ideally, importers should aim to have their goods on the ship well before the close down period and even avoid shipping between October and February when demand for space on ships out of China is at its peak. Remember there may be a backlog of orders when the factories reopen so don‘t count on your products being manufactured in the first couple of weeks back from New Year either.
#2 Fill the Shipping Container
LCL (Less Than Container Load) means your order doesn’t fill a 20 or 40 foot shipping container. Standardised stackable shipping containers were introduced in the 1950s and now 90% of non-bulk cargo is containerised for easier loading and carrying on ships. By ordering a little more stock to fill the container and hold what they don’t need until a later date could save an importer on transport costs and a reduced unit price.
If it’s not possible to fill a container, then a freight forwarder will merge the cargo with other LCL shipments to fill a container. Also known as ‘Groupage Shipping’, they pack together the goods for multiple clients to fill a container. They charge clients on a cubic metre measurement. A 20 foot container has a 33 cbm and a 40 foot container holds 66 cbm. Importers can also save money by using a 40 foot container rather than a 20 foot one because you can fit in double the product for a small cost difference.
#3 Mixed Transport Methods
Shipping lines visit most ports regularly but some ports receive more ships from China than others. If you are located at a less popular port, you may have to wait longer for your goods to arrive and pay more.
Consider if it’s cheaper to mix transport methods like sea freight to a further port then road to your door. Sometimes, multiple modes of transport is the fastest and cheapest method of getting your goods delivered.
#4 Shipping Insurance
Your goods face several risks while in transit. Imported goods can be stolen, pilfered, hijacked or damaged through rough handling, dropping, exposure to rain or salt water and variations in temperature. Goods can be lost at sea in rough weather or destroyed through fire, the ship sinking or a road traffic accident on the way to the wharf. Insurance is the only way to protect the buyer or seller.
Incoterms with Insurance Included
Two Incoterms, Cost Insurance and Freight (CIF) and Carriage and Insurance Paid to (CIP) require the seller provide the buyer with evidence of insurance for the consignment. For all other Incoterms, the buyer should arrange adequate cargo insurance.
Shop Around for the Best Insurance Deal
Don’t accept the first insurance policy quote you receive. Some importers buy insurance through the shipping line but it may not be the cheapest or most comprehensive policy. Do your research and get quotes from third party insurance companies to make sure you get the best deal.
When our clients use Vara Allied to source and import their products we are already insured with shipping, manufacturers and public liability insurance so this is one less thing for them to worry about.
#5 Buy your Goods FOB
If you buy your goods CIF, it is the seller’s responsibility to arrange freight and insurance for the delivery. Often there is a markup added to cover the seller’s time. If you buy goods Free on Board (FOB), you control the cost of freight and can look for the most competitive rate.
#6 Plan So Goods Aren’t Urgent
Like all modes of transport the more urgent shipped goods are needed, the more you can expect to pay. If you need your goods to go on the first available ship out of China you will pay more than if you book in advance and wait. For some industries, it is impossible to plan far in advance when goods are required. They wait for orders to come in then order the goods to their customers’ specifications. But if you can anticipate stock requirements in advance, you need not pay a premium for urgent transport.
#7 Use a Freight Forwarder
If you are new to importing or you don’t ship on a regular basis, it pays to use a freight forwarder and customs broker. If you don’t have a FCL (Full Container Load), you will need a forwarder to join with other importers to fill the container. A freight forwarder can often get a better rate from a shipping line than if you go direct.
If you aren’t getting the best deal on your manufacturing and shipping, call Vara Allied on (08) 6161 8041 or contact us online.