Since 2008, imports from China to the United States are up a staggering 59.7%. In fact, the country has become the U.S.’s largest goods trading partner, with imports of electrical machinery, furniture and bedding, toys and sports equipment and plastics leading the charge.
We’ve certainly seen a rise in new companies getting into this market. While many take advantage of the Amazon platform to sell these imported goods, we’ve also seen several companies establish their own websites.
If you’re new to importing goods from China—or you’d like to get in on this nearly $560 billion-dollar market—there are a couple of common mistakes you’ll want to avoid. We’ll show you the six we see most often. By avoiding these pitfalls, you’ll shorten your learning curve and save yourself significant time, money and hassle.
Mistake #1: Dismissing Air Freight as “Too Expensive”
When you’re bringing goods over from China, you may automatically assume that ocean freight is the way to go. You’ll likely get a quote for a consolidated shipment (also called a less-than-container load—LCL). In this arrangement, your goods will be combined into a container with other shipments headed for your final destination.
Now, here’s what you may not realize: Ocean freight is subject to additional charges at the port, which may not be noted in your LCL quote. For example, once your container arrives at the destination port, it has to be received, it has to be stripped and, since it’s coming from China, it has to clear customs. Additionally, even if you have a small shipment, many ports have minimum charges—and these fees can start to stack up and crush your profit.
In contrast, air freight is subject to a flat $20 handling fee. And if you choose a service like consolidated air freight, which offers lower prices in exchange for a more flexible timeline, you may find that air freight is more cost-effective than you originally thought.
Which kinds of shipments are good for air freight? Air freight cost is calculated based on your shipment’s actual weight or its volumetric weight, whichever is greater. (Discover more about air freight pricing here.)
Very heavy shipments will likely be cheaper by ocean freight. However, if you’re buying goods that take up a lot of space but don’t have a lot of weight—a shipment of pillows, for example—that cargo might be a good candidate for air freight.
When it comes to shipping methods and costs, there’s another big mistake many new importers make.
Mistake #2: Not Understanding the Incoterms You’ve Agreed To
When you enter into a buying agreement with a vendor in China, you’ll agree on who pays for moving your goods from origin to destination. To make this process easier, you’ll use what are called Incoterms:
Incoterms: A set of rules established by the International Chamber of Commerce (ICC) to define who’s responsible for shipping, insurance and tariffs in a contract between a buyer and a seller.
By using a standard, three-letter designation, you’ll quickly establish who pays for what without a lot of unnecessary back and forth. Some of the most common Incoterms you’ll see include EXW (Ex Works), DDP (Delivered Duty Paid) and FOB (Free on Board).
However, if you don’t understand the Incoterms you’ve agreed to, your costs may end up being much higher than you anticipated.
Here’s a real-world example:
An importer agreed to purchase goods shipped FOB. What she didn’t realize was that, under those terms, she still had to pay for all the costs once the goods were on board the ship bound for the U.S.—things like unloading at the port, customs clearance, loading of the goods onto a truck at the port and more. At the end of the day, she was looking at $250+ in charges she wasn’t expecting.
If the importer had purchased the goods shipped DDP, the seller would have been responsible for all the costs, up to and including final delivery.
To make sure you understand all eleven Incoterms, take a look at the following chart:
By fully understanding the Incoterms you’re agreeing to, you’ll get a much better grasp on the full costs associated with importing your goods.
There’s also another set of costs you’ll need to be aware of when it comes to importing from China.
Mistake #3: Not Understanding Your Product Well Enough, Resulting in Unexpected Tariffs
With the recent changes in tariffs on goods imported from China, it can be challenging to understand which tariffs will be assessed on your shipments.
Your best bet? Know your product well enough to do the right research.
For each one of your imports, be sure to request the HTS code. The Harmonized Tariff Schedule is a 10-digit classification system that determines the duties assessed on imports to the U.S.
Although the HTS is a U.S.-specific system, administered by the International Trade Commission, the first six digits of every HTS code correspond to the international Harmonized System, administered by the World Customs Organization.
Once you have the HTS code, you’ll be able to get an accurate estimate of your tariffs, either by:
- Researching them on the U.S. Trade Representative website.
- Asking your freight forwarder or customs broker to check the tariffs for you.
Tariffs for some products are currently as high as 25%, so this is an area you’ll want to pay close attention to.
And while we’re on the topic of freight forwarders, let’s talk about our next common mistake.
Mistake #4: Assuming You Don’t Need a Freight Forwarder
If you’re new to the import business, you’ll soon discover that logistics has a language all its own. FCL, LCL, drayage, consignees, detention and demurrage, transshipments, waybills, bills of lading—it gets complicated quickly. (And don’t forget about the eleven Incoterms!)
A freight forwarder can help you navigate both the vocabulary and the logistics involved with shipping from another country. For example, if you’ve accepted EXW shipping terms, how confident do you feel about arranging for a local carrier in China to move the shipment from the seller’s warehouse to the port? If you hire the right freight forwarder, it’s a walk in the park for them (and you!).
So before you decide you don’t need the help of a freight forwarder, try a complimentary quote on your next project. In addition to saving you time, a good freight forwarder can leverage their expertise to help you find the most cost-effective way to move your goods.
The other thing a forwarder can assist with is understanding the true timelines you’re working with, another mistake that new importers commonly make.
Mistake #5: Underestimating Transit Times
When you’re arranging for a shipment from China, you might hear an estimate of 12 days’ transit time. That might lead you to think you’ll have the shipment in your hands in 12 days.
Usually, that 12-day estimate starts the moment the boat carrying your goods leaves port. What it doesn’t take into account is:
- The time it takes your goods to get to the port and get loaded onto the ship, which can take as much as a week.
- The time it takes your shipment to get unloaded, deconsolidated and to its final destination, which can also take another week.
So instead of 12 days, you’re likely looking at somewhere around ~26 days from door to door. A good forwarder can help you come up with an accurate estimate that ensures you have the inventory you need to keep your business running smoothly.
There’s also another element these transit times don’t take into account.
Mistake #6: Ignoring the Possibility of Customs or Paperwork Delays
If your container is chosen for inspection by U.S. customs, your shipment can be delayed by anywhere from a few days or a few weeks. Additionally, incorrect paperwork can also cause your shipment to be held up until the errors are corrected.
Working with a freight forwarder or customs broker helps minimize the possibility of incorrect or incomplete paperwork. And while they also may be able to help reduce the possibility of customs inspections, sometimes it’s just the luck of the draw.
To keep delays to a minimum, make sure you provide your forwarder or broker with all the information they need for your shipment. And, if you can, build in some flexibility into your supply chain—either by adding in a time cushion or by holding extra inventory as a backup—so you’re not caught without goods when you need them.
Avoiding the Errors That Cost You Time and Money
Technology has made it easier than ever to build a business around importing goods from China. With direct access to a wide variety of manufacturers, there’s ample opportunity for securing the exact goods you’re searching for, at a price that keeps you profitable. And when you can avoid these six common mistakes, you’ll be on your way to establishing a business that runs like clockwork.
Looking for some help with the logistics around importing from China? Our international experts can make it easy. Just get in touch with us for a complimentary quote on your next shipment. We’ll help you get the best rates—and understand all the angles so you know exactly how much you’re paying when all is said and done.