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How Much is Your Product Worth?

Personalised Freight Solutions (PFS) job is to assist, educate and facilitate.

An important service we provide is to assist our clients in understanding the value of their product when it lands at their door here in Australia.

What is Landed Cost? “A landed cost is the total price of a product once it has arrived at a buyer’s door. The landed cost includes the original price of the product, all transportation fees (both inland and ocean), customs, duties, taxes, insurance, currency conversion, crating, handling and payment fees”

Knowing the landed cost of the goods you are importing is vital to be able to gain an understanding on the viability of it in a retail market. The cost of importing your goods can equal if not exceed the actual purchase price of your goods.

Just today, on two occasions both myself and Christine heard “but the goods are only worth……….. and the shipping is double that!”.

It is important to research the cost to import your goods including all the import taxes prior to setting up an entire business model on your product. For example, you have a Chinese supplier who will sell you a 20′ container of chairs, they are offering a sale price of USD 22.00 (AUD 29.00 at today’s exchange) per chair for minimum order of 450 chairs. When looking at the retail market, you can sell these chairs for AUD 45.00 max to be competitive. This gives you a total profit AUD7,200 when you sell all 450 chairs.

However, what will the chairs be worth after you import them to Australia? I can tell you, by using our landed costing model that they will be worth AUD 39.00. This reduces your profit to AUD 4,500 total. To maintain your AUD 7,200 profit if that is what you have based your business model on you would actually need to sell these chairs for AUD 55.00 per chair. Does this make you AUD 10.00 per chair more expenses then your competitions? Can you sell all 450 at this price in the chair market?

Your freight forwarder should be more than a supplier who moves your freight into (or out of) Australia. Your freight forwarder should be able to advise you on the true value of your goods landed so that you have the confidence that your business is making viable decisions on the products it is selling.

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Project Management

Personalised Freight Solutions was appointed the Australian freight partner for a global manufacturer of washing equipment based in the UK to see the movement of 2 multi-million dollar washing plants from Belfast to Adelaide port and onto site for commissioning. This project launched late last year with the first round of containers landing in Adelaide in December 2016.

Since December, Personalised Freight Solutions has coordinated multiple shipping container and breakbulk shipments. Bringing together shipping lines, customs brokers, international trade & excise consultants & trucking companies, to ensure all shipments are moved through our borders and to site in the time expected and providing communication back to the global manufacture at origin.

The global manufacturers Logistic manager based in the UK has described Personalised Freight Solutions work as “first class” and will be working with them further on another soon to be launch project in Sydney.

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Inconsistent Pricing

 

A reoccurring comment we hear from LCL importers is “Why is it that our charges are so inconsistent?”. On investigation, we find that it all comes back to the agreed incoterms of sale. Generally finding that it is that the importer is buying on CIF terms.

CIF is “Cost Insurance Freight”, the buyer is paying the seller for the cost of the goods, transit insurance and Freight to port of entry at destination country. This for importers seems like the “easiest” option.

However, what this can create is limit control on timing, create additional work for the buyer to stay on top of shipping details to plan for the goods on arrival and local charges being charged according to which ever consolidation handling office the suppliers consolidator uses.

Does that mean you should not buy CIF? No, this is still a good option for many importers. To solve the common issues with control and inconsistent charges, communicate with your supplier and your freight agent. Make your expectation clear and ask that your supplier(s) and your freight agent work together to ensure that your expectations on timing and costs are still being met.

3 easy tips that may assist:

  1. When accepting a CIF quote from the overseas seller, issue them with a Purchase Order that outlines expectation on arrival time into Australia
  2. Provide a copy of the quote, purchase order and specific details of the seller to your freight agent. Ask they communicate with the seller to determine the consolidator details and associated arrival charges when arriving in Australia. Your freight agent can advise the seller what are the acceptable arrival charges so this can be negotiated when the seller is booking with the consolidator at origin.
  3. Establish a landed costing model with your freight agent. A landed cost is establishing what your goods are worth when they arrive at your door in Australia prior to being sold into the market. This will give you a value window of acceptable costs to pay on import rather than specific costs.

The key to limiting inconsistencies is EXPECTATION AND COMUNICATION!

 

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“My goods ship from China, therefore they are Duty Free”

Many Importers have been enjoying a saving of 5% on their import duties since the China-Australia Free Trade Agreement took affect 20th December, 2015.

For importers, both experienced and new who still think “My goods ship from China, therefore they are Duty Free” please take time to completely understand the implications of the Free Trade Agreement and specifically how the goods you are importing are affected.

It is not correct to make the assumption that because your goods ship from China they are automatically duty free and if your representation who handle your border clearances are declaring them as such with out the correct documentation, it is you as the importer who will be held liable for the 5% duty not paid at the time of importation. 5% of your total imports for the year would certainly add up, in additional to interest and fines.

A good starting point is asking the following questions of your representation:

  1. Are my suppliers providing a certificate of origin for each shipment?
  2. If they are, does the certificate of origin state a HS code for each item in each shipment?
  3. If they are, does the certificate correctly link to all the other commercial documentation for the shipment?

If any of these answers are no, but your duty rate has dropped on your customs declaration. Work with your freight agent and your suppliers to get this right for past and future shipments.

It may be that your items have not dropped to 0% duty at all and will not do so until 2019, in fact if you are importing items that fall under the likes of HS Code 62304300 Boys Shorts, and provide a Certificate of Origin you will end up paying 6% duty!

see http://www.chinaaustraliafta.com.au for further guidance.

 

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3 Ways to Reduce Costs on Importing

As a business owner myself, I understand the need to keep costs as low as possible to remain competitive in your market and gain a healthy profit margin.

When looking at the logistics chain, many importers believe “shopping around” to get the best price is the best way to ensure costs on shipping remain as low as possible. Sure this will absolutely work on face value but may become a somewhat false economy!

If you have a trusted relationship with a freight provider but would like to assess to see if there are any areas in the process where money can be saved, here is 3 suggestions on where to start looking:

1. Documentation

In Australia, to clear goods through our borders it is not always necessary to have to have original documentation. If you pay for your goods before they leave the sellers factory, discuss with the seller and your freight agent to have electronic copies of the shipping documents. This can include: Bill of Lading, Commercial Invoices, Packing Lists, Packing Declarations and Certificate of Origin.

Very often we see (especially ex China), sellers using international couriers to send original documents to the buyers attracting a fee of sometimes up to USD75.00 per shipment.

2. Rate negotiation based on Volumes

Many shipping lines will reduce shipping rates based on commitment of volume on their services. If you are an importer shipping between 2 to 5 containers a week, speak to your freight agent to make sure they are negotiating the best freight deals on your behalf based on your volumes.

Your freight forwarder should be doing the shopping around not you, that is their role, make them work a little harder on your behalf. Loyalty will pay off!

3. Transit Times

Transit times can play a role on both the international and domestic leg of your goods being moved. With international sea freight, as an example, a 2 week transit from Shanghai to Brisbane is not the only option you have when shipping ex Shanghai. There are transit times up to 4 weeks that may see a saving of up to USD 300.00 per container. Work with your freight agent and communicate when cargo is needed (specific dates) so they can work on giving you options based on required dates, rather than say a direct option or a transhipment option.

When the goods arrive into Australia and need to be moved domestically, there are options between a direct drive service and an all day service. If you are in your warehouse from say 8 to 5 everyday of the week and the goods do not need to be there at any particular time, opt for an all day service. There may be a significant saving depending on volumes and distance of travel.

Again communication is key, question what the process currently is and if your business model allows for change work with your freight agent to make the changes and SAVE MONEY! Who knows you may save more than the seemingly “better” quote that you shopped around for.

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China Freight Rates – 2015 vs 2016

With the first Quarter of 2016 behind us, it is interesting to check in to see where the freight rates Ex China are sitting.

As you can see from this chart, rates are significantly lower than that of 2015. It was around this time last year that we reported in on rates and how they were trending. What seemed like rates too good to be true in March, April or May 2015 now seem a little high when we you place them in comparison to March or April of this year.

Freight Rates - 15 vs 16

What are the drivers of low freight rates? And why is it a constant up and down situation? It is a simple case of supply and demand. With the low Australian dollar (in March for Example as low as 0.67) and the down turn in mining in Australia, the vessels out of China are carrying less cargo.

To try to make a comparison it is like the circle of life

circle of life

Today’s media is full of reports on the unrest in our government, the Australian dollar movement, Mining and taxes all these economic drivers will affect where the freight rates sit.

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ChaFTA – What does it all mean?

At Personalised Freight Solutions we strive to ensure our customers are being educated on process improvements and industry changes in relation to their freight movements internationally. When the government issued a media release 9th December announcing the China Australia Free Trade Agreement (ChaFTA) would set to start and flow as at 20th December (http://trademinister.gov.au/releases/Pages/2015/ar_mr_151209.aspx), we knew we had to act fast to gather comprehensive information and present it in an easy to follow way ensuring importers and exporters would have a complete understanding on how these changes would affect businesses on an individual basis. We have put this website together to take out all of the propaganda and give the facts in real terms.

  • FACT – Not all imports from China will be immediately eligible to claim 0% duty on their exports / imports to / from China.
  • FACT – A staging system will be used to start to implement this trade agreement. Rates for ‘Year 1’ will apply immediately from December 20, 2015, Rates for ‘Year 2’ will apply from January 1, 2016 and so on.

Our Lookup tool will provide this information on what stage your product will be eligible for 0% Duty on Import – http://www.chinaaustraliafta.com.au

Ensure you check the FAQ’s for documentation guidelines or feel free to contact us for further guidance!

 

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Have you experienced damaged cargo or loss?

How frustrating is it to receive packages in the mail or delivered to your door and they look like a dog’s breakfast? Do you go back to the online store? Or direct to the supplier & send an email or give them a call to let them know your dissatisfaction.

Or are you on the receiving end of this email / phone call?? ….. How do you feel about receiving complaints from your clients saying they received the package damaged or only partially delivered?

Unfortunately, somethings are out of our control and some risks unpreventable, however did you know that almost 70% of all cargo losses are preventable?

How do I prevent cargo loss?

By being aware and paying attention to the risks that your cargo can be exposed to during your chosen mode of transport will reduce the loss of cargo.

These risks come in many forms, a few have been listed below, Have you considered any of these?

Handling… Rapid acceleration/deceleration of lifting/lowering to ship. Tilting during loading (fork truck handling). Pushing/dragging. Mishandling due to unsuitable equipment or unskilled labour. Improper weight distribution. Unsuitable lifting points.

Via Road… Acceleration/deceleration (stop and go/sudden braking). Impact against loading dock. Tilting (swaying on curves). Vibration and road shocks.

Via Rail… Acceleration/deceleration. Coupling impact (shifting / jolting) Swaying on curves. Vibrations.

Via Sea… Rolling, pitching, yaw and sway, surging. Wave impact Vibrations

Water damage… Rainwater (including snow and ice) Seawater Condensation (in container or on a delivery drivers truck if no tarp / cover)

Flooding, Theft/ Pilferage… Exposure of cargo/ container during all operations including transfer between points. Hijacking of container (Piracy)

Contamination… Residual materials or odours from previous load. Incompatible cargo. Proximity to hazardous or noxious cargos, cross contamination

Errors, omissions and delays are issues that we have all experienced in our lives. It may have been a missed consignment, late delivery, etc. The process of getting materials through airports and wharves can be a complex process.

So what can be done if the flight departure, or the sailing, is missed?

Firstly look after the integrity of the product, especially if it needs special storage. Subsequently look to make alternate arrangements with the exporter / Shipper, Investigate the problem. Identify the cause – this is not a witch-hunt – and implement appropriate procedures and policies to avoid it happening again.

What about Fraud??

Frauds are the result of illegal and unethical behaviour. Fraud may be perpetrated by a number of parties in the transaction, including:

  • the supplier (incorrect or substandard goods)
  • the buyer (obtaining delivery under false pretences)
  • the carrier (changing the departure date on transport documents)
  • and border control agencies (seeking ‘facilitation payments”)

Having Personalised Freight Solutions as your preferred international freight forwarder, we consider the types of processes and the issues that may be encountered, we assist in mitigating these risks and look at what we can do to assist you with these risks when they do occur.

Risk mitigation is the anticipation of risk, so how can you mitigate risk if you do not know or understand the process? How can you identify, analyse, evaluate and treat the risk in ignorance?

You must understand the risk you are trying to manage! Let the team at Personalised Freight Solutions help you.

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Have you Considered? Packaging

Our series on “Have you Considered?” has all been about highlighting topics that we can take for granted, our recent post regarding packaging is one of these topics.

It is taken for granted, more often than not, that if you are buying from an overseas company who facilitate selling their goods to an international market that they know how to package goods or will ensure goods are adequately packed for export.

A question we are often asked is “how can we ensure that goods will be packaged adequately?”, the answer to this question is to check, check and check again. In your initial confirmation of purchase advise of your expectation on packaging, communicate with your freight agent your expectation and have your freight agent express further the expectation on packaging.

To provide further assurance on the standard of packaging, we would suggest to engage in a pre shipment inspection service, Personalised Freight Solutions can provide some direction in this area, please contact us via email / phone / Social Media to be provided further information,

Bec