You need to get your product from the supplier to Amazon’s warehouses. Put that way, it sounds easy. But it might involve quite a few different steps – it’s not as easy as sending a letter to your mom by USPS.
• ‘Incoterms’ stands for ‘international trade terms’, a bunch of standardised arrangements for shipping. That means you don’t have to negotiate every single little thing, and it also means you know who is responsible for the goods at each stage of the journey. Let’s sum the incoterms up in a list.
• EXW means ‘ex works’. Once the factory has the goods on the loading dock, their responsibility is at an end – they don’t have to load the truck, get the goods to the port, arrange for the shipping or customs. You also take on the risk when it leaves the factory, so you need insurance.
• FOB means ‘Free On Board’. The factory is responsible for getting the goods to the port of shipment, and paying for the shipping to your arrival port. The goods are your problem once they’ve been loaded on to the vessel. (Also, you have to clear the goods for export.)
• FCA is often used instead of FOB, and stands for ‘Free Carrier’ to a named place of delivery. The seller is only responsible for loading the goods if they deliver from their own premises or warehouse – otherwise you will be responsible for loading.
• DDP – Delivered Duty Paid. The seller is responsible for delivering the goods to the named destination, including loading, freight and unloading. You only take on responsibility for the goods when they arrive. The seller also has to clear them through customs in the US – that can be an issue for some factories who are not used to exporting.
• There are two other types which have now replaced the old DDU (Delivered Duty Unpaid). These are
◦ DAP – Delivered At Place. The seller is responsible for packing and clearing customs in the country of export, but you’re responsible for unloading and for customs in the US.
◦ DPU – Delivered at Place Unloaded. This is similar to DAP but the goods will be unloaded at the seller’s cost. However, if the goods are in a container, it’s not clear whether ‘unloaded’ applies to the container or the goods.
So you see incoterms cover a spectrum from the seller doing nearly all the heavy lifting, to you being responsible right from the factory gate. It’s crucial to specify the place where you want the delivery (whether that’s a port or your warehouse), and watch out for sneaky changes of incoterms if you’re trying to negotiate the price down!
Whichever terms you use, you’ll end up paying for shipping, either in the price of the goods, or yourself. So how can you minimise your shipping costs and have the best experience?
• Take up less space. If packaging is designed to fit your products closely, it’s not wasting space you’ll have to pay for.
• That said, double-box fragile goods or you could end up losing more in breakages than you save in freight costs.
• Don’t palletize the goods till they get through customs.
• Choose the right mode of transport for the goods. For large shipments, ocean freight is normally a lot cheaper at less than a dollar per kilo, whereas air will cost $5-7 a kilo. But it has a high fixed cost, making it uneconomic for smaller deliveries. For shipments under 50 kg weight, air freight or even courier may be cheaper.
• Don’t forget to insure your cargo. Insurance is less than one percent of the total shipment cost and it saves you losing your entire capital on the first shipment.
• Remember you’ll need a Material Safety Data Sheet for hazardous goods. That’s a wider definition than it sounds – it includes anything with batteries in, for instance.
Now get ready to have lots of fun with the paperwork. Or get a freight forwarder who can do it for you.