20151002 Information Sharing: - International Transportation (Part II)
October 2nd 2015 Taipei
Information Sharing: - International Transportation (Part II)
… continue from http://www.fi-measurement.com/news/e4qY6H84JxkmKexs7YBInbIw8Of8qhgZfdkJnPEZ
Again, we use exporting from China as example for our following illustrations…
Basically, a forwarder can be appointed by consignee or shipper.
- If a forwarder is appointed by consignee, then in most cases, this forwarder will get their agent in China to contact the shipper and to arrange all things in order to get the cargo on board. The usual sales term for this case is FOB, that means that freight will be paid by consignee at destination (freight collect)
- If a forwarder is appointed by shipper, they will assign an agent in destination to follow up those things after the cargo will arrive. The usual sales term for this case is C&F, that means that freight will be paid by shipper in China (freight prepaid).
- For freight consideration, it is always cheaper for “prepaid” than “collect”. And freight difference can be up to 50% if we use prepaid amount as comparison base.
FM always welcome consignee to appoint their own forwarder provided that the total local charge we will be charged is reasonable (say not more than 15% when compared with what we have to pay to our own forwarder). Why?
- There must be some reasons for the consignee to choose that forwarder, FM has to respect consignee’s decision.
- Sometimes, it is difficult and to quote the actual and correct freight in short period of time (the time interval between a purchase order is received and proforma invoice is issued) or on timely base. If we quote excessive, customer will feel being robbed by FM; If we quote short, then it is always not a good idea to ask consignee for more afterward.
- If anything will go wrong, FM will be free from all un-necessary trouble because we did not choose this forwarder.
About chargeable items and rates
What things can be wrong if a forwarder is appointed by consignee
- In order to secure, forwarder is usually willing to lower their overall quotation to consignee. Then the question is how and from where the forwarder will get the money back to make normal /good enough profit? Yes, from shipper.
- Thus, it is quite common the shipper will be robbed in this case. Every year, FM encounters 4 ~ 5 similar cases in which we are charged 40% ~ 75% higher than normal in China. It took time and effort to correct these cases back to track.
- Some forwarders think that since they are appointed by the consignee (i.e. the buyer), they can charge shipper whatever they like. It is not unusual in China that the forwarder try to sounds like the grandfather of shipper’s.
What things can be wrong if a forwarder is appointed by shipper
- Same like the above example, but in this case, the forwarder will try to make the shipper as happy as possible. Now the consignee is now in danger.
- For sea transportation… some forwarders offer zero sea freight or even give money to shippers for certain routes. It is mainly because… A. competition is too high for certain routes and sea freight is relative cheap when compare with the profit they can get from other chargeable items like, warehouse/terminal handling, documentation, customs broker, EBS, CIC … etc.), B. as the result of un-balance international trade between 2 destinations… many empty containers are left in certain sea port but are badly needed at destination.
- Be honest, we are not sure if zero or negative sea freight is offered by carrier or not. Our concern is… what will happen to consignee if a forwarder has to pay shipper and, make it worse, the money is not actually from the carrier.
Well, if we look at the total amount to be paid by shipper and consignee as a fixed amount, then this fixed amount is a zero sum game… i.e. the less the shipper pays in local, the more the consignee will have to pay in destination or vice versa.
The common practices (we do not discuss those dirty tricks / things here) of balancing the above are: -
- Shifting some chargeable items from one party to another party (e.g. from shipper to consignee or vice versa).
- Increasing the rate of chargeable items.
- Creating some items which do not / should not exist at all.
To make a fair enough international trade with your partner, it is always a good practice to ask a forwarder to disclose what are the chargeable items and rate which your trade partner will have to pay.
About on board delay
We have to admit that on board delay does not happen often to air transportation. On board delay happens more for sea transportation. Common reasons are: -
- Weather condition (e.g. typhoon, thunderstorm, mist).
- Sea port congestion especially when economic is good and during particular time period (e.g. before shipping deadline of cargo for Christmas and before Chinese new year holiday).
- Late arrival of vessel (because of delay departure from last departure port and whatever reasons).
- Problem of vessel itself, e.g. mechanic problem of the ship.
- Forwarder’s reason/problem
There is not much we can do for or compliant against point 1 ~ 3 above. While point number 4 is rare, but I must say that I am stilling refusing one particular carrier company because once upon a time, I encountered consecutive and continuous delay of different shipments to different destinations by different vessels but with the same carrier.
Let’s talk more about forwarder’s reason/problem.
Drop out cargo
- A 20 feet container can hold around 27 ~ 28cmb. If a shipment has more than 15cbm, we will usually recommend ship it by FCL (whole container). It is because the total charges for shipper and consignee of shipping 15cbm by LCL is similar if shipped by a 20 feet container.
- Forwarder books containers with carrier by full container instead of part of a container (e.g. 1/4 of a 20 feet or 40 feet container). Forwarder then re-sale the container as a whole (FCL) or partial (LCL) to different customers. Some customers make FCL shipment, while some need LCL shipment.
- Forwarder will put various LCL cargoes from various shippers into one container and try to fill it as full as possible in order to save money (pay to carrier) and earn more profit (from shipper).
- Drop out cargo means those excessive cargo after all containers has been allocated. For example, a forwarder may not be willing to afford another container (with carrier) just to load 1cbm of cargo from a small customer inside. It is not because of the sea freight difference, but also that other handling charge (e.g. lifting a container onto board and then lift in down again at destination).
- If it is the case, the forwarder will only ship this drop out cargo with the next available vessel. It will not be a big problem if there is many vessels to the same destination within a week, but imagine what will happen if there is only one vessel to that destination every 2 weeks or even longer.
Not enough cargo
Not enough cargo means the forwarder is not able to collect enough cargo afford a whole container with carrier. The usual solutions of forwarder in this case are: -
- Hold the cargoes they already collected and wait for another vessel and see if more cargo can be collected.
- Combine cargoes of various ships with various schedules and put them all into a container.
Nobody likes delay and in case of delay, usually shipper and consignee would like to know the exact reason for the delay in order to find out some other solutions in case we need. Unfortunately, not all forwarder will tell the truth.
… to be continued…