When I was covering the importing aspect and logistics of bringing my private label product into the United States, there were a lot of questions about the minutiae of how this works. I thought that it would be helpful if I shared some of my own experiences importing, at a high level, and lay out some of my best practices and takeaways from personal experience. I realize that there isn’t a lot of good information about shipping and logistics online, and frankly it is an unsexy PITA (pain in the ankles) so I'm not really surprised.
While I love to dig in and explore Amazon sales trends and data, there is no data if you can’t get your product into the Amazon warehouses. Say hello to our little pesky friend, Logistics! Not my favorite cup of tea, but vitally important….so let's get in to this!
A few caveats. First: there is a lot involved, more than I can cover in one post, including your freight option (air, ocean, ground, etc), customs brokerage, tax regulations, and documentation galore. This post won't be fully comprehensive, but perhaps the first of several posts covering this topic. Second, I am writing this from my experience bringing products into the United States from China. The rules and regulations will likely differ if you are importing/exporting from different countries. And third, you will want to do your own research and due diligence beyond what I say, I am just offering my opinions.
Why Use Ocean Freight?
- Cheaper than Air: Often 50%+ cheaper, as you can see with the Jungle Stix second shipment being significantly cheaper. The savings goes straight to the bottom line!
- Scalable for the long term: Related to being cheaper than air, it is more realistic that a business cuts expenses where possible, and shipping costs represent some easy fat to trim. It will require some inventory management and accurate forecasting to ensure that you can time your supply with changes in demand, but once you get an idea of your sales velocity and seasonality, you can start saving money and increase margins by shipping ocean freight.
- Good Experience: It may not feel like a great experience when you are filling out paperwork and planning logistics, but it is indeed a great learning experience and can build good habits: researching potential suppliers and gathering quotes, understanding hidden costs related to your Amazon product, and building relationships with various vendors to help grow your business. I realize that this sounds like an “eat your vegetables” type maxim, but seriously, you will learn a lot by shipping ocean freight and much of it can benefit your business down the road!
- Paperwork and documentation: More on this later, but there is much more paperwork necessary with ocean freight rather than air. You will be paying for vendors to help you navigate these challenges, but it is often a hassle nonetheless.
- Time: Sending your products via ocean will require 4-6 weeks, depending on your location and final destination of the cargo. This is obviously much longer than the 3-7 days required when sending via air. For your first shipment, this isn't ideal as it delays your listing from being active and actually generating revenue, and ties up your capital on a cargo ship crossing the Pacific Ocean. For subsequent orders though, you can probably time your manufacturing and shipping needs to ensure that you get your product to Amazon warehouses without going out of stock.
- More middlemen costs: I did just say that ocean freight is cheaper, and therefore a better option cost-wise. However, there are so many fees, duties, taxes, etc, that the actual cost of shipping gets obfuscated. For example, when importing my second batch of Jungle Stix, the ocean freight part of the shipment was about $150, but after the export customs permit, export license, origin handling, pickup, telex, truck fee, destination handling, and customs charges the total came to about $1200.
Ocean freight is like doing push-ups. Sucks at the time but pays off. #hustleon Click To Tweet
The Freight Forwarder vs. The Customs Broker
Freight Forwarders are the ones who manage the long haul, moving product internationally from one country to another. They are your agents who will make sure that you play within the byzantine laws of internationally shipping, who are your go-between/middle men between the shipping companies and the importer/exporter. Your freight forwarder will make logistical arrangements with your supplier, nail down the scheduling and shipping company, and ultimately get your product from overseas to a port in your desired country.
Customs Brokers are more specialized to the moment when your cargo lands on US soil, they navigate the process of clearing your shipment at customs borders, which includes aspects of paperwork and documentation, taxes, duties, and other items. This is a challenging and complicated process best left to the pros. Plus, do you think you can be present at shipping ports at the time your cargo arrives? The customs broker gets your shipment through customs on your behalf. I sometimes even think of the customs broker as the “canary in the coalmine”, the trusty guide weaving you through the maze of importing, customs, and endless paperwork.
Many companies offer both services, though housed in different departments. This makes it easier for us as importers to use a one-stop-shop, and presumably the communication is smoother between Customs Broker and Freight Forwarder if it is one company. However, it is by no means a deal-breaker if it is not all one company.
Will Amazon Offer A Freight Forwarding Option?
This is a quick aside, but fun to think about. Will Amazon be moving into the logistics and shipping game soon? Perhaps you've seen recent news of Amazon filing to get a license to be a freight forwarder in the US here, here, or many other places on the internet in mid January 2016.
Is Amazon going to compete against UPS, FedEx, and DHL now?! I don’t buy it, and I ain’t scurred of it! From what I’ve read, it seems that it is just about optionality, so Amazon isn’t reliant on third party vendors in times of high demand, like the holiday season. Of course, this could just be the red herring, and they do intend to get into ocean freight. Some may worry that this means that they will now be competing against Chinese suppliers who launch their own private label products. This as well does not concern me, I am quite certain that they make multiples more margin on selling wholesale in bulk rather than one-off products via Amazon. I think that we as sellers will benefit from Amazon being a freight forwarding option, as it would allow for a faster and more stream-lined transport from China to the US, or whichever country you are selling in.
Amazon going into freight forwarding will only benefit us as sellers. This is opportunity! Click To Tweet
And now back to our regularly scheduled program….
What Is a Customs Bond, and When Do You Need One?
Customs Bonds are proof to Uncle Sam that he’s collected all necessary taxes and fees he can with your imported shipment. In short, quoting the US Customs and Border Protection: “If you are importing merchandise into the U.S. for commercial purposes that are valued over $2,500, or a commodity subject to other federal agencies requirements (i.e. firearms or food), you must post a Customs bond to ensure that all duties, taxes and fees owed to the federal government will be paid.” You can read more about Customs Bonds on the official website here.
Personally, I have a “continuous bond” because it saves me a little money over having to purchase a “single entry” bond each time I import goods from overseas. If my memory serves me correctly, single entry bonds are usually $40 unless you're importing goods valued at more than $10k. My continuous bond cost me $450, however is good for all my shipments for a calendar year.
Having Issues with Clearing Customs?
It is unfortunately not uncommon to experience a hold up in clearing customs. I faced that with Jungle Stix, which contributed to the delays and ultimately running out of stock for a few days. It generally takes 2-4 days to clear customs, though it varies. It's my understanding products that come into contact with food usually take longer, as well as anything else that the FDA doesn't like.
If you have your cargo held up and inspected at customs, it can add on another few days (or weeks if you're unlucky) to the importing process, and incur further charges, which you as the importer would be responsible for. I am not certain exactly what the red flags are, but it is generally best practice to complete all forms as meticulously and accurately as possible. Then hope for the best!
Some Ocean Freight Best Practices
Have your paperwork handy: You will generally need to provide the following information just to initiate a quote and move forward:
- Commercial Invoice
- Packing List
- Location of Supplier and Final Destination (ie the Amazon warehouse or the storage warehouse you are sending to)
- Size and weight of goods being shipped
- Terms (FOB, EXW, etc.)
Gather Quotes: You will want to gather various shipping quotes from different companies to get an idea of costs, the services offered, and who you work well with. If you can gather the information mentioned above (commercial invoice, packing list, supplier and destination info) beforehand and have it readily accessible, it can accelerate the time it takes to gather quotes and compare providers. There is no doubt that the adage is still true, TIME IS MONEY. Save time wherever you can!
Write down your Details: You will need to supply how your product is packed (as in pallets, individual boxes, comingled/mixed inventory, etc), how many boxes, and the size, weight, and quantity of the boxes.
Know About the Importer Security Filing (ISF): As the importer, you are required to file some basic information before the cargo departs overseas and arrives in the US (this is strictly for imports into the US). If you don’t file this, file it inaccurately, or file it late, then you can enter a US Customs merry-go-round of fees, further inspections, seizure, etc. Read more about it here, My freight forwarder has always taken care of this for me but be aware of this ISF Filing and make sure it gets taken care of it because ultimately it is your responsibility.
Have An Importer of Record: Amazon will not be the importer of record for any shipment coming in from overseas. Your shipment will be rejected, incurring time delays, cost, and face palms.
Know The Hidden Costs: There are various costs associated with ocean freight that you may not know about. It is not that your freight forwarder or customs broker is cheating you, but moreso it is incumbent on you as the importer to know the small details.
For example, here are some costs to be aware of:
- Cargo Insurance: if there is any damage, theft, or unwanted issue with your product while in transit, Cargo Insurance can cover the costs. Opting for this is required by some companies and even if not can be a worthwhile investment, especially if your cost of goods is very high.
- Customs Clearance: this refers to getting your products past US Customs and to your final destination in the US. This is why you pay for a freight forwarder or customs broker, so that you don’t have to deal with this yourself (which sometimes means actually delivering the forms to customs in person!).
- Customs Bond: You can opt to do continuous if you plan on doing lots of shipments or a single entry customs bond.
- Arrival Agent Fees: If these were not paid for with your initial freight forwarding quote, then you will need to pay these to the arrival agent for handling your domestic (ie in the United States) logistics.
- Warehousing Fees: If you have more inventory than Amazon can store at the warehouses, you need to find a place to store the excess cargo. Rack this up to warehousing/storage fees. Again, you want to make sure that you handle inventory as efficiently as possible to minimize these fees that can wack your bottom line with a swift thump.
- Delivery to Amazon Warehouses: Even using Amazon's discounted partner fees can still add up, perhaps more than you realize? Just know that they exist and plan around them!
DO NOT JUST HAVE YOUR SUPPLIER SEND YOUR FINISHED PRODUCT TO AMAZON WITHOUT CONTACTING A FREIGHT FORWADER OR CUSTOMS BROKER FIRST! Amazon will not be your importer of record, and you will need to have a freight forwarder handle your cargo from the vessel, or else you will experience additional fees, fines, inspections, and delays. No Bueno.
Be very clear with your freight forwarder about what type of product your are importing: If it is something that may require an additional clearance, like foodstuffs that need approval by the FDA, then you want all that information known by the people handling your product.
An Informal Glossary:
Importing your goods can be intimidating because there are so many acronyms and jargon that pop up and create confusion.
I've laid out a few terms that I think are most important and that you will likely come across:
Bill of Lading (B/L or BoL): The Bill of Lading is a document between the shipper and the carrier that grants the freight carrier an ownership of receipt for the goods and proves that the cargo was received for shipment. It is required for all shipped goods (whether air, ocean, rail, or ground), and must be signed by the shipper, the carrier, and the recipient. The BoL will contain information detailing the type, quantity, and destination of the goods
CIF (Cost Insurance and Freight): CIF means that cargo is delivered to the importing port (in our case, that would be the US). All expenses related to duties, taxes, and delivery would be my responsibility, as the buyer.
DDP (Delivered Duty Paid): DDP means that cargo is delivered all the way to final destination warehouse, in our case the Amazon warehouses. And all duties, taxes, and delivery fees have been already paid.
FOB (Free on Board): FOB means that the supplier would assume all expenses of bringing the cargo to the port (in our Jungle Stix example, Shanghai). From that point, all international shipping and related fees are my responsibility, as the buyer.
LCL (Less Than Container Load): If your cargo does not fill a whole ocean freight container, you will be shipping “LCL”. Your goods will be shipped with other cargo until the transport provider can fill the container. You will generally pay a higher overall rate for this, as the carrier will have to arrange for other LCL shipments to be consolidated and shipped in one full container. LCL is advantageous as you can ship goods at a quantity you are comfortable with (as opposed to filling a whole container you’re your own inventory), and you can ship as soon as your goods are ready.
FCL (Full Container Load): When you ship FCL, you have the exclusive rights to using a full ocean freight container. Of course it depends on the costs you are quoted, but for any 20’ container, if I can fill more than half the volume of the container, it is worthwhile to compare the costs and logistics of LCL vs. FCL.
All of this seems pretty complicated, however, a good freight forwarder/ customers broker should be able to handle 90% of it for you. The first place to start is contact freight forwarders with all your information, get quotes and proceed from there. Personally, I use Flexport because they were the only freight forwarder I found who's website/technology didn't seem stuck in the 1990's. I've heard they're not accepting new customers right now but there are plenty of other (and possibly cheaper) options.
I hope that this was a helpful high-level primer on how to import via Ocean Freight. As I mentioned, there is a lot more that I did not cover, and frankly, a series of blog posts would be necessary to cover the details of how this works in its entirety. But I'd love to know what you think or what other challenges you are facing, hopefully me or someone in the Jungle Scout community can help! Just drop your thoughts in the comments section below, the Facebook group, or @junglescout on Twitter. Wishing you continued success with your importing game!
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