How International Shipping Rates Are Determined
Shipping goods from one international location to another requires greater levels of efficiency. It is therefore important to hire the most reputed and reliable shipping company for this job. In most cases, however, people want to avail the best services at the most reasonable rates. Let us discuss in this article some of the important factors that determine international shipping rates:
Shipping Location: International shipping rates are largely determined by the shipping destination. The distance that has to be covered in order to ship your goods to their target destination is one of the major factors that determine the shipping costs. Moreover, while considering the location to determine these costs, the dimensional weight and height of the goods are also taken into account.
Weight of the Goods: The weight of the good that has to be shipped is also an important factor determining the shipping costs. Measuring the weight of an item is not a convenient process that involves combining mass properties with the height of the item. Reputed shipping services are equipped with a special kind of scale that can identify these factors automatically. This weight measuring process however is not used to determine the shipping costs of crates items, which are determined by the length, height and weight of the item. Again, if you choose to ship your goods by placing them on a pallet instead of a crate, the shipping costs are calculated on the basis of load.
Type of Good to be shipped: International shipping rates also depend on the type of item that has to be shipped. Items that are structurally large such as furniture, cars, etc. require higher shipping charges. The most significant reason contributing to this higher cost is the need to crate these large sized items.
Mode of Shipping: The mode of shipping is another significant factor determining the shipping costs. If you need a whole container to ship your goods, you would certainly need to pay more than if you avail container sharing services. Full containers undoubtedly cost more than shared containers. Moreover, the kind of goods that you need to ship also plays an important role in determining the costs for shipping. Shipping fragile and valuable items is definitely an expensive process since they need special packaging for adequate protection and also because you need to pay extra insurance for them.
Additional Costs: In case you need additional supplies to ship your goods, your shipping costs would increase. For example, if your goods need a box or envelope, you would definitely need to pay extra charges for them. It is always advisable to obtain sufficient information on the additional costs that you would need to pay for extra supplies.
It is wise to make a thorough research of the market to know about attractive deals and discounts provided by various shipping companies. However, for some of your precious items such as your car, it is always advisable to choose the most efficient services in order to avoid any kind of future disappointments.
Understanding International Trade Import Export Language
As the number of my exports increased I have also increased the amount of time I dedicated to understanding the business more. This was a completely new world to me and it was hard to decipher all the 3 word acronyms that were used by my customers, the manufacturers, and the shippers. The solution was simple; study up on it.
I checked out from the local library as many books on the subject of importing and exporting as I can. The more time you will spend reading on the subject, the quicker the specific language they used becomes familiar to your brain. A word of advice is that many of the books I read delves into a lot of details on international agreements and legal issues. Most of that detailed and somewhat complex and boring information is something that you may never need to care about. So when you read any of these books and you find yourself discouraged as it seems to be very hard and too complex; remember that its simply buying and selling products and you only need to learn the basics and learn more as you go.
Even at the beginning when I did not know much about the details needed for shipping goods or handling banks letters of credit (a way to get paid); I was able to get them done because the freight forwarder (shipper) I worked with had specific questions for me that I can take to the manufacturer to get answers for (such as what type of packaging the goods will be in when they pick them up and what are the sizes and weights). The same with the bank; they sent me papers and questions that I was able to fill out. Whenever I did not understand a question and I could not find an explanation for it after research, I would simply ask the bank for clarification. The first transactions I did naturally took more time but as I did more of them the easier and quicker it got. I made few mistakes here and there but luckily none of them were deadly or unfixable.
So head to your local library and get started speaking the lingo.
Here is a start:
|advance against documents:||A loan secured by turning over shipment documents of title to the creditor; an alternative to acceptance financing.|
|advice:||A form or letter that acknowledges certain activities concerning shipments, credits, etc.|
|advising bank:||A bank, operating in the exporter’s country, which handles letters of credit for a foreign bank by notifying the export firm that the credit has been opened in its favor. The advising bank fully informs the exporter of the conditions of the letter of credit without necessarily bearing the responsibility of payment.|
|after date (A/D):||A payment on a draft or other negotiable instrument due a specified number of days after the date the draft is presented to the payee.|
|after sight (A/S):||A payment on a draft or other negotiable instrument due upon presentation or demand to the payee.|
|air waybill:||A bill of lading covering both the domestic and international portions of flights to transport goods to a specific destination. The air waybill serves as a non-negotiable receipt for the shipper.|
|arrival notice:||This document advises consignees (named in the bill of lading) that cargoes have arrived, the condition of the cargo if other than expected, and any charges due.|
|at sight:||A phrase indicating that payment on a draft or other negotiable instrument is due upon presentation or demand.|
|back-to-back credits:||A term commonly used to denote letters of credit issued for account of different buyers to cover the same shipment, the terms of which credits are similar that documents under one are subsequently applicable against one another.|
|bank guarantee:||An assurance, obtained from a bank by a foreign purchaser, that the bank will pay an exporter up to a given amount for goods shipped if the foreign purchaser defaults.|
|banker’s acceptance:||Occurs when a draft is drawn on and accepted by the importer’s bank. Depending on the bank’s creditworthiness, the acceptance becomes a financial instrument which can be discounted.|
|beneficiary:||The person in whose favor a draft is drawn or a letter of credit is opened.|
|bill of exchange:||Also a draft. A written unconditional order for payment from a drawer to a drawee, directing the drawee to pay a specified amount of money in a given currency to the drawer or a named payee at a fixed or determinable future date.|
|bill of lading:||A document establishing the terms of a contract between a shipper and a transportation company for freight to be moved between specified points for a specified charge. Usually prepared by the shipper on forms issued by the carrier, it serves as a document of title, a contract of carriage and a receipt for goods.|
|buyer credit:||Term to provide the exporter with prompt payment by the overseas importer, who borrows the necessary funds from the bank. The payment is usually made directly by the importer’s bank to the exporter.|
|carnets:||Customs documents permitting the holder to carry or send merchandise temporarily into certain foreign countries for trade shows or sales meetings, without paying duties or posting bonds.|
|cash against documents (C.A.D.):||A payment method by which title to the goods is given to the buyer when the buyer pays cash to an intermediary acting for the seller, usually a commission house.|
|cash in advance (C.I.A.):||A payment method for goods in which the buyer pays cash to the seller before shipment of the goods. Usually required by the seller when the goods are customized, such as specialized machinery.|
|cash with order (C.W.O.):||A payment method for goods by which cash is paid at the time of order and the transaction then becomes binding for both the buyer and seller.|
|certificate of inspection:||A document often required in connection with shipments of perishable goods, in which certification is made as to the good condition of their merchandise immediately prior to shipment.|
|certificate of manufacture:||Statement by a producer, who is usually also the seller, of merchandise that manufacture has been completed and that the goods are at the disposal of the buyer.|
|certificate of origin:||A certified document detailing the origin of goods used in foreign commerce.|
|C&F named port:||Cost and freight. The seller must pay all costs of goods and transportation to the named port; these costs are included in the price quoted. Buyer pays risk insurance once the goods are aboard the ship up to overseas inland destination.|
|CIF named port:||Cost, insurance, freight. Same as C&F except seller also provides insurance up to the named destination.|
|CIF&C.:||Price includes commission as well as Cost, insurance, freight|
|CIF duty paid:||The seller includes in the final price to the buyer, in addition to C.I.F., the estimated duty.|
|CIF&E.:||Price quoted includes currency exchange from U.S. dollars to foreign money as well as C.I.F.|
|clean bill of lading:||A document specifying that the goods were received in apparent good order by the carrier.|
|clean draft:||A draft to which no documents are attached.|
|collection:||An exporter draws a bill of exchange on a customer abroad and gives the bill to his/her bank to collect funds. The importer must be willing to pay. The bank charges a fee to collect payment, but is not liable should the importer refuse to release the funds.|
|collection papers:||All documents, including bills of lading, invoices and other papers, submitted to a buyer to receive payments for a shipment.|
|commercial invoice:||Itemized list of goods shipped, usually included among an exporter’s collection papers.|
|confirmed letter of credit:||A letter of credit issued by a foreign bank with payment confirmed by a U. S. bank. An exporter who requires a confirmed letter of credit from the buyer is assured payment from the U.S. bank in case the foreign buyer or bank defaults (see letter of credit).|
|consignment:||The delivery of merchandise from an exporter to a distributor specifying that the distributor will sell the merchandise and then pay the exporter. The exporter retains title to the goods until the buyer sells them. The buyer (distributor) sells the goods, retains a specified commission and then pays the exporter.|
|consignor:||The seller or shipper of merchandise.|
|FOB:||Freight Prepaid: The same as F.O.B. named inland carrier, except the seller pays the freight charges of the inland carrier.|
|F.O.B. Named Inland Carrier:||Seller must place the goods on the named carrier at the specified inland point and obtain a bill of lading. The buyer pays for the transportation.|
|F.O.B. Named Port of Exportation:||Seller is responsible for placing the goods at a named point of exportation at the seller’s expense. Some European buyers use this form when they actually mean F.O.B. vessel.|
|harmonized system:||The harmonized system (HS) is a classification system for goods in international trade that provides a uniform system of product classification for all major trading countries.|
|import:||To bring foreign goods or services into a country.|
|inland bill of lading:||A bill of lading used in transporting goods overland to the exporter’s international carrier, where the ocean bill of lading becomes applicable. Although a through bill of lading can sometimes be used, it is usually necessary to prepare both an inland bill of lading and an ocean bill of lading for export shipment.|
|letter of credit (L/C):||A method of payment for goods by which the buyer establishes his/her credit with a local bank, clearly describing the goods to be purchased, the price, the documentation required and a limit for completion of the transaction. Upon receipt of documentation, the bank is either paid by the buyer or takes title to the goods themselves and then transfers funds to the seller. The bank will insist upon exact compliance with the terms of the sale, and will not pay if there are any discrepancies.|
|irrevocable letter of credit:||A letter of credit which obligates the issuing bank to pay the exporter provided all the terms and conditions of the letter of credit have been met. None of the terms and conditions may be changed without the consent of all parties to the letter of credit (see letter of credit).|
|ocean bill of lading:||A contract between an exporter and an international carrier for transportation of goods to a specified foreign port. Unlike an inland bill of lading, the ocean bill of lading is a collection document, an instrument of ownership which can be bought, sold or traded while the goods are being shipped. There are two types of ocean bills of lading used to transfer ownership.|
|open account (O/A):||A trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment, with 30-45 days accounts payable, for example. The buyer’s integrity must be unquestionable, or the buyer must have a history of payment practices with the seller.|
|packing list:||This document includes information that is needed for transport, as well as the number and kinds of items that are being shipped.|
|port of entry:||A port where foreign goods are admitted into the receiving country.|
|pro forma invoice:||An invoice prepared by an exporter before the shipment of merchandise informing the buyer of the kinds of goods to be sent, their value and important specifications such as size, quantity and weight.|
|quotation:||An offer to sell goods at a stated price and under stated terms.|
|standby letter of credit:||A letter of credit issued to cover a particular contingency, such as foreign investors guaranteed payment for commercial paper.|
Source: Breaking into the Trade Game; A U.S. Small Business Administration International Publication