Having as much control over your freight as possible is always vital in order to manage your supply chain.
In this article, we explain the importance of controlling your freight when ordering from overseas.
Understanding Incoterms to avoid unexpected costs
Whilst ordering from your supplier overseas using pre-paid Incoterms such as CIF or CFR (to arrival at the port of discharge) can look attractive at first glance, it often has many pitfalls and can lead to several issues.
This is why Pinnacle always recommends controlling your own freight by shipping ‘freight collect’ using Incoterms such as Ex-Works or FOB when ordering from overseas. Allowing your overseas supplier to control and pay for the freight can actually lead to higher costs, increased stress levels, a lack of control and additional transit time for your important shipment.
The supplier is usually only interested in shipping your products to you as cheaply as possible. As with most things, if the price looks too good to be true, it probably is! Therefore, when ordering from your overseas supplier always ask them for an Ex-works or FOB price, rather than just CIF or CFR to arrival port of discharge.
Advantages of shipping Ex-works / FOB
There are many advantages of shipping Ex-works/FOB. Here are a few of the main ones to be aware of:
Relieve stress and improve service levels
When tracking your shipment, Pinnacle will monitor it through every milestone of the shipment, keeping you updated on its progress and sending bespoke shipment reports.
Knowing where your shipment constantly is and receiving a Notice of Arrival (NOA) in good time enables you to avoid late payments to your supplier in order to release the B/L and reduce the risk of additional charges such as demurrage.
You’ll also only deal with one freight forwarder for everything. If you buy on a pre-paid basis such as CIF/DAP, you will be dealing with several different companies for each shipment. Pinnacle will assign one point of contact to look after your shipment from start to finish.
It’s also worth noting that providing you have a suitable credit rating, you can pay freight charges on account rather than paying the freight up front to your overseas supplier.
When shipping CIF, the insurance offered may be limited and not cover everything which you would expect, such as General Average for example. Therefore, take control of insurance and either arrange through Pinnacle for a small premium or add marine insurance onto your business policy to ensure you have a fully comprehensive cover in place.
Control of the shipment
Do not get hit with unexpected charges. Although the price to get the shipment to the UK port can look very attractive, higher UK terminal charges and handover fees can actually result in you paying more for your goods than you have budgeted for and make it more expensive overall.
Avoid chances of demurrage/quay rent charges through not knowing where your shipment is or when it’s arriving, and having to rely on other agents to send you a NOA. This may not allow you enough time to obtain the release of the B/L due to late payments to your supplier. Also, you may not receive a NOA at all, so your shipment is clocking up demurrage charges without you even being aware of it
You can enjoy just one point of contact, so you avoid dealing with several different agents each time which often use multiple points of contact for deliveries, invoicing, customs clearance and the like. Pinnacle will assign one point of contact to look after your shipment every step of the way.
Pinnacle can also chase your overseas supplier through our network of agents for updates on goods-ready dates and proposed shipping dates, making sure that the earliest space is secured with the carriers and that you are fully aware of any delays in production.
Know exactly what you are paying and to whom, avoiding the chance of scam payments and having to pay charges that you were not expecting upfront before you can get delivery of your shipment.
Using a trusted agent like Pinnacle who are AEO certified to ensure your shipments are declared to the authorities correctly and the correct Import Duty and VAT are paid. It also ensures the correct method of payments are applied, such as VAT through Postponed VAT Accounting, use of correct deferment accounts etc.
We can also provide a document trail. Pinnacle scan all documents for each shipment, so can easily be provided in the event of an inspection by HMRC. They can also be accessed online. Pinnacle will also pre-lodge your shipment to UK customs to ensure any holds such as paperwork inspections are completed early, reducing dwell time at the port of discharge.
In summary, it is our suggestion that you keep control of your shipment by shipping freight collect with Pinnacle when ordering from overseas to make sure you know exactly what you are paying for and to avoid the many pitfalls as set out above.
Contact Pinnacle today and speak to one of our global logistics experts for information, pricing and advice for your unique requirements.
UK: +44 (0)845 6216 111 / email@example.com
US: US +1 757 306 1211 / firstname.lastname@example.org
Next time – why it is not always the easiest solution to ship Ex-works when exporting overseas.