To remain competitive in their marketplace many companies
who traditionally manufactured or bought their products in the
UK, are now being forced to consider importing directly from
the countries who can supply their goods at considerably
lower cost.
Whilst the initial cost savings are very attractive, this has to be
evaluated along with the cost of bringing the goods back to the UK.
It is very easy to under-estimate these costs and subsequently lose
much of the benefit you gain by importing your products.
This useful guide has been written as an aid to ensuring that you
and your staff are aware of all of the often ‘hidden costs’ that can so
easily eat into your profit margins.
It is written in simple ‘plain English’ to assist those who are new to
importing rather than the professional Logistics Manager.
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Shipping Methods
There are 2 main modes of shipping goods, both of which are extensively
used.
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| Seafreight |
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| Airfreight |
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The choice of which method is used depends on the commercial factors surrounding the
products themselves and the markets they are being supplied to i.e.
Price
Weight
Bulk (dimensions)
Lead-time
Customer expectations and demands |
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| For example :- |
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It is pointless shipping Christmas gifts, bought in Hong Kong for the retail
market, by Sea in December.
It is unviable to send a large, empty, low value Wardrobe by Air.
It would be inadvisable to send 10 high value watches by Sea. |
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| As a general rule :- |
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Seafreight is the cheaper option, especially for heavy or bulky items however
delivery lead-time is longer.
Airfreight is very quick however more expensive.
Whilst most companies have their preferred method of transport which is
determined by their market conditions, sometimes they will use both methods
on the same project e.g. A clothing company may send the initial stock of a
new 'seasons' collection by air to meet their customers launch date and ship
the bulk product by sea for economy.
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Seafreight
This is the method chosen by most companies if they are shipping
(Heavy or Bulky) product. The costs are low however the lead-time
is longer, anything between 20/40 days from departure to arrival.
Most goods are packed & shipped in ‘containers’ and depending on the amount/volume of
product being shipped you would choose either:- |
| FCL (Full Container Load) |
As the name implies, an FCL container carries only your products and can accommodate
whatever mixture of products you choose. If you are buying from one supplier, the container
would be taken to their premises, loaded on site, sealed and collected for onward shipment
to your premises in the UK.
Should you be buying from a number of suppliers, you can arrange to have all of your goods
delivered to your nominated freight agent and he will arrange to load ‘consolidate’ the
container for you at his premises.
Additional cost savings can be made on the packaging of goods travelling within an FCL as
they can be arranged to maximise the internal space and do not require security packing.
The standard container sizes are 20 foot and 40 foot length.
Apart from the obvious advantage of the lower freight cost, the additional Export/Import
processing, Handling & Haulage costs are all more economical as processing a full container
is calculated as a single transaction. |
| LCL (Lesser Container Load) |
On this service your shipment is ‘consolidated’ along with other company’s goods travelling
to the same Destination. This is the practical solution when you do not have enough product
to justify a full container.
The rates applied are calculated by the Volume (cubic metres) space your goods take up and
they reflect the additional charges to load & unload the ‘consolidated’ container at both the
Ports of departure & arrival. |
| Seafreight Costs to be Considered |
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Collection/Loading/Delivery from shipper to Port |
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Export documentation, Bill of lading fee |
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Storage, Consolidation if required |
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Terminal Handling charges |
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Freight Charges |
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Terminal Handling charges |
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Customs clearance charges |
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Import Duty & VAT (calculated by
Customs & Excise) |
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De-stuffing (breaking up an LCL
‘consolidation’ |
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Demurrage (storage in the event of
any delay in moving your goods) |
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Road Haulage to your premises
and unloading |
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Airfreight
Air Freight is the choice of most companies to ship lightweight,
valuable or urgently required goods. The lead-time can be as short
as 2 days to travel from one side of the world to the other. Whilst the
costs are normally higher than Seafreight, the benefits gained by the
speed of supply can be significant.
Most international destinations are covered by both passenger and freighter aircraft. The
large International airlines often fly into the more popular locations several times each day.
Even the most unusual countries & locations are adequately covered.
The choice of aircraft will depend on the size, shape and volume of your shipment, most
General cargo can travel comfortably in the cargo hold of a standard passenger aircraft
however oversize, larger consignments may have to be flown on a ‘freighter’ aircraft (no
passengers, freight only) which can accommodate larger cargo.
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| Routes |
| Most popular destinations are serviced directly by more than one airline and many also offer
an ‘indirect’ service which in effect sends goods to the final destination via one or more
transit airports at no additional cost the shipper. |
| Airfreight Costs to be Considered |
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Collection/Delivery from
shipper to Airport |
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Export documentation |
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Delivery into Airline |
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Airline Handling (loading goods
onto aeroplane) |
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Freight Charges |
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Customs clearance charges |
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Import Duty & VAT (calculated by
Customs & Excise) |
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Airline Handling (unloading goods
from aeroplane) |
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Collection from the airline |
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Any additional storage required as
a consequence of delays |
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Road Haulage to your premises |
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Terms of Shipping
The costs that you will incur depend on the terms that you negotiate with the
supplier of your goods. There are many variations of these (see chart below)
however the most common are: |
| Ex-Works |
| Buyer is responsible for all costs incurred from the seller's door. |
| FOB (Free on Board) |
| Seller pays for everything up to the Port/Airport of departure, including the export charges. |
| CIF (Cost, Insurance and Freight) |
| The seller pays to send the goods to the port of destination and arranges the minimum cover
marine insurance (see Insurance section). |
| DDU (Delivered Duty Unpaid) |
| The seller delivers to the buyer's door and pays all costs with the exception of Duty & VAT. |
| DDP/CARRIAGE PAID (Delivered Duty Paid) |
| The seller delivers to the buyer's door and pays all of the costs. |
| Which Mode Do You Choose ? |
| Whilst the obvious attraction is to purchase CIF, DDU or Carriage Paid in reality most
goods are bought Ex-Works as the consignment travels under the control of the buyer and
the product cost, lead-times, mode of transport, standard of transport, route chosen etc.
can all be negotiated & monitored. |
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| Import Supply/Shipping Chain |
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1. MANUFACTURER/WHOLESALER (Supplier)
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Prepares and packs goods for collection |
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| 2. ROAD HAULAGE COMPANY |
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Collects from Shipper (supplier) and delivers to docks/airport |
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| 3. EXPORT SHIPPING AGENT (Overseas) |
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Receives and stores goods, arranges any ‘consolidation’ required
Prepares Export documentation
Negotiates rates and books freight service
Delivers to Seafreight company or Airline |
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| 4. SEAFREIGHT COMPANY OR AIRLINE |
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Checks goods/documentation
Loads onto vessel/aircraft |
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| GOODS TRANSPORTED TO DESTINATION |
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Unloads awaiting collection |
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5. IMPORT AGENT (UK)
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Informs customer of arrival status
Customs clears goods
Arranges payment of Duty and VAT
Arranges collection from docks/airport
Arranges internal UK delivery |
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| 6. CONSIGNEE (Buyer) |
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| FACTORS TO BE CONSIDERED |
The costs that are applicable to goods being Imported to the UK will vary depending on the
skill/experience/knowledge of the person negotiating them.
Naturally we would recommend that you use a bona-fide IATA Freight Agent that you can
trust at both ends of the chain. They will have the necessary experience and local knowledge
to avoid the pitfalls so often encountered by inexperienced customers. |
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Caution…
When goods purchased overseas are paid for in advance by Letter of Credit or Bank
Draft their ownership and safety, becomes the responsibility of the buyer. It is important
to work with an agent that you know & trust as once someone has possession of your
goods, you often have no option but to pay whatever price is asked for their services
otherwise your goods do not move and often will incur excess storage charges whilst
any disputes are resolved. |
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Most freight associated charges are calculated per kilo on the Volume weight of your
goods (see Dimensions/Weight, Volumetric calculations on page 7) and small lightweight
consignments are often subject to minimum charges.
A professional freight agent will advise you of these charges when they quote you for
shipping your consignment.
Unless you have set up credit facilities in advance with Airlines, Shipping lines,
Customs & Excise, everything has to be paid before your goods are released and
additional storage charges are applied to any delay
e.g. If you wish to pay an airline charge by cheque, it will take 4 working days to clear, in the
meantime your goods are charged storage at an average rate of £0.07 per kilo per day. As
an example, a consignment of 1000 kilos stored for 4 days would attract storage charges of
£280.00
Week-ends are included in the calculation and the additional storage charges will also
have to be paid in advance before the goods are released
Your freight agent will attend to all of these areas on your behalf and will help keep all costs
to a minimum. |
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| Glossary |
| The following pages contain an explanation of some of the most
common terminology encountered in relation to importing goods. |
Customs Duty and VAT
Most goods coming into the UK from outside the EEC are subject to Import Duty and VAT charges which are determined by Customs & Excise.
The rates of duty applicable vary and are published in the CUSTOMS & EXCISE TARIFF
which is regularly updated.
Every consignment (even those which are Duty free) arriving in the UK from outside the EEC has to undergo the Customs Clearance procedure.
Any Duty &/or VAT charges applicable have to be paid in advance with ‘cleared’ funds to
Customs & Excise before the goods can be cleared for collection.
Most IATA registered freight agents have a Customs Deferment account (DAN) which in
effect is a credit account that allows the immediate release of your goods into their care
awaiting your payment. A small charge is normally applied for this service however it does
allow your goods to move quickly and avoids any unnecessary storage charges. |
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Duty is calculated on a CIF (carriage, insurance & freight) basis using the applicable % rate. |
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VAT is calculated on the CIF rate plus the Duty. |
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| Any consignment can be held by Customs & Excise for investigation at their discretion.
There are various levels of investigation which can usually be handled by your freight agent.
The most common reason for ‘investigation’ is the incorrect presentation or omission of the
relevant documents relating to the goods arriving. |
GSP (Generalised System of Preference)
Customs & Excise allow relief or reduction of Duty on certain categories of goods depending on their Country of Origin.
Your freight agent can advise whether your goods are eligible and obtain the appropriate
documents required. |
Dangerous/Hazardous Goods
As the name implies these are goods which could contaminate/damage/endanger persons or other freight and are therefore subject to specific packaging requirements.
These goods are generally Explosive, Corrosive, Volatile and whilst many are obvious e.g.
Gas canisters, Fireworks, Acids, sometimes, apparently harmless products can also fall into
this category e.g. Cigarette lighters, Paint, Nail polish, Christmas crackers. |
Dimensions/Weight
All freight & related costs are generally calculated and charged on the weight of the consignment.
To compensate for the variance in space taken up by lightweight, bulky items i.e. empty
boxes take up as much space as full boxes.
All Airlines and Shipping companies apply a standard VOLUMETRIC calculation which
converts the dimensions of the goods into an equivalent weight of heavier items.
The freight charges are calculated on the greater of the ACTUAL or VOLUMETRIC weight. |
Airfreight
The current industry Volumetric weight calculation is :-
Dimensions in centimetres: Length x Width x Height x number of items divided by a factor of
6000
Seafreight
Charges are calculated in cubic metres i.e. the space taken up.
Dimensions in Metres: Length x Width x Height by the number of items (i.e. boxes/pallets)
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Freight Costs
The following charges are typical of those applied to freight travelling on Aircraft or Vessels: |
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| Air Freight |
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Sea Freight |
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| From overseas |
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From overseas |
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| Airline handling |
Receiving and loading
the cargo onto the
aircraft |
Terminal handling |
Receiving, placing of
cargo ‘container’ onto
quayside ready for
loading onto vessel |
| Freight charge |
Actual cost of
transport |
Freight charge |
Actual cost of transport
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| Fuel surcharge |
Excess fuel charge,
which is subject to
fluctuation of the
Oil price |
BAF |
Bunker Adjustment
factor, excess fuel
charge, which is
subject to fluctuation of the Oil price
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| War risk: |
Universal airline
charge applied to
cover the increased
costs of passenger/
staff/cargo insurance |
In UK |
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| Security |
X-raying the goods to
ensure that they are
safe to fly |
Terminal handling |
Unloading cargo onto quayside ready for collection/onward delivery. |
| In UK |
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Rent & Demurrage |
Applicable to FCL,
chargeable if the
container does not
clear quayside within
5 days of arrival. |
| Airline handling |
Unloading the bulk
cargo ready for
collection |
Demurrage |
Additional charge
levied to cover the
‘container’ rental cost
should it not be
returned to the
shipping line after
5 days. |
| Storage |
Excess storage
charges if the goods
are not Customs
cleared & collected
within 24 hours of
arrival |
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Import Licence
Nominated goods from some countries may require an Import license to enter the UK, it is very important to investigate this before the goods are shipped.
If you are in any doubt check with your freight agent or the DTI (Department of Trade
&
Industry).
Any goods arriving before the issue of an appropriate licence, are held by Customs & Excise
and storage charges applied until the licence is raised.
Insurance
The insurance of goods is normally the responsibility of the ‘owner’ therefore goods bought
on a Carriage Paid basis would be insured by the Shipper, goods bought Ex-works would be
the responsibility of the buyer.
Most Airlines, Haulage companies, Airline handlers, Freight agents carry goods subject to an
Internationally agreed ‘limited liability’ insurance which is invariably much lower than the
value of the goods themselves.
Most people understand the principal of arranging their own personal travel insurance as if
their luggage goes astray the airline will only award a very small compensation based on the
weight of the suitcase and not the value of the goods it carries.
Commercial freight insurance is very similar and it is advisable to cover your goods by a
Marine Insurance policy which provides much wider cover based on the value of the goods
rather than the weight.
Your freight agent can arrange this cover for you. |
Rates of Exchange (Currency)
Transactions are negotiated in many currencies however the most popular currencies used in importing goods are:
$US US Dollar
$HK Hong Kong Dollar
GBP UK Sterling
Euro
As currency rates fluctuate daily most UK freight agents will convert charges received in
foreign currencies into GBP £STERLING and invoice you at the published daily rate with a
small adjustment made for the currency conversion transaction. The freight agent seldom
wishes to speculate on the International Currency market and therefore unless previously
negotiated would expect to charge all invoices in STERLING. |
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Skymart Worldwide can provide your business with a complete range of freight services to simplify
the process of Importing goods into the UK from anywhere in the World.
Our Skymart Worldwide Partner System ensures that we can offer local knowledge and expertise in
all of the major trading countries in the World. By having our own ‘partners’ looking after your
shipments we can offer you a fast, safe, reliable service at very competitive rates. |
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AIRFREIGHT
SEAFREIGHT
WAREHOUSING
LOCAL TRANSPORT
CUSTOMS CLEARANCE
IMPORT/EXPORT DOCUMENTATION
DUTY, LOCAL TAXES
INSURANCE
CERTIFICATES OF ORIGIN |
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Our sky360 tracking service will automatically keep you informed by E-mail of your consignments
progress. Should you wish you can also have your own Client Room setup on our website tailored to
your own requirements.
Give us a call and one of our experts will be delighted to advise you on any project you are
considering or provide a quotation to handle any consignment you wish to move. |
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London
Skymart Worldwide
Building 1081,
Scylla Road
Heathrow Airport
Hounslow
Middlesex
TW6 3YH
Telephone: 020 8759 8914
Fax: 020 8759 1100
Email: info@lhr.skymartworldwide.com
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Manchester
Skymart Worldwide
Manchester International Office Centre
Styal Road
Manchester
M22 5WB
Telephone: 0845 345 7745
Fax: 0845 345 7746
Email: info@skymartworldwide.com
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