When developing estimates for an import or export campaign, it’s common to focus on the costs. Be it from international sales contracts and rates for the type of international transport that you’ve chosen, for example, ocean freight. But there are other important aspects beyond these factors that you must keep in mind in order to avoid unpleasant surprises in the form of unexpected additional costs.
Under certain circumstances, these costs include port and customs charges, that if not properly allotted for, can eat up profit margins.
But don’t worry—if you avoid committing the errors we’ve listed below in order to help you keep a lid on excess costs, you’ll be able to greatly reduce the risk of unpleasant surprises with the final bill from your freight forwarding agent.
1. Not verifying free time in advance.
Free time is the number of days that a port allows your goods to be stored in their warehouses without you having to pay extra. Usually, you will have seven free days, but a lot of ports allow for 5 days only, especially in the US.
You may ask for up to 14 or 21 such days but the amount of free time that could possibly be granted usually depends on local standards. We can always request more, but both carrier and port could turn us down. They will decide whether or not to give these to you, depending on the volume of your shipment and other aspects, and if they grant them to you, they’ll be free.
These must always be requested in advance: you request them through your forwarding agent, and they ask the shipping line, and if you are granted them, this will be reflected in your Bill of Lading. Keeping things under control by being able to anticipate and ask for those extra days when you expect that you may have problems can save you a great many extra costs resulting from delays.
2. Not researching regulations and specific documentation requirements for destination country
Many countries have specific requirements for imports; laws or rules are not the same across all countries, so when you’re planning your campaign, you’ll have to do a bit of investigating to confirm that your products satisfy regulations.
You can get this information by calling customs officials and/or chambers of commerce of the country of destination; this will help avoid a situation in which your products travel across the ocean but can’t be unloaded because you didn’t consider the specific regulations of the country.
Let’s take an example. Imagine that you export used cars. There are many countries that will not allow such vehicles into their territories if they are more than five years old. Not having informed yourself as to whether there are specific regulations regarding your product in the country of destination and whether you comply with them could mean that your cars could arrive there and not be permitted to be unloaded.
3. Not preparing customs documents correctly
This is a very common error that causes many problems that are easy to avoid. Customs documents (bill of lading, packing list, certificates of quality) must be complete, correct, clean, and clearly presented.
This may seem obvious, but it isn’t. Haste often leads people to overlook things when submitting these documents, and incorrect or illegible data can cause your goods to be placed in the “orange channel”, which means that customs wants to review your documents in more detail or ask you for a missing document, or requires corrected information. This takes time—possibly days, depending on the case—and in the meantime, your goods will be waiting at customs to be shipped, sometimes while accruing storage charges or other costs that you could be liable for.
4. Not satisfying import requirements
As well as the regulations of each country and sector, there are specific requirements for the importation of certain products. For example, if you wish to import motorized wheelchairs, you will not be able to do so unless you have a pharmaceutical or orthopedic license.
Whether you import or export, being unaware of these requirements can cause you a lot of problems. Such things need to be checked carefully, as with countries’ specific regulations. You can do this by contacting customs officials or the chambers of commerce of the importing country.
5. Warning: Check potential GRI prior to loading cargo
The GRI, or General Rate Increase, is the rate increase that shipping companies apply. The way the GRI works worldwide is totally different compared to the US. If the rates are agreed overseas, the GRI is programmed to be applied at the beginning of the month but is only confirmed a few days in advance, when the major shipping lines give their okay. If they decide to apply the GRI, all who have shipments scheduled for those dates will want to reserve a place in the cargo that is shipping before the application of this GRI. This means that if you have not planned and prepared in advance, your shipment will arrive late because you won’t have a place on the vessel, and that will mean that your goods will depart later in freight that could end up costing you double what it would have cost before application of the GRI.
However, in the US works very differently: in order for a GRI to be applied, the new rates have to be filed 30 days in advance.They are subject to 30 days filing prior to going into effect. Having said that, please note that there are no rules for notification so your freight forwarder cannot guarantee that he knows 30 days in advance if a GRI is upcoming. The effective date for a set rate is the date the cargo is surrendered to carriers possession.
Our advice: check back prior to loading cargo if your booking is done basically 14 days prior to loading date. That way you are more in the safe side in terms of potential risks deriving from unexpected new rates.
Wrap-up: Don’t forget the GRI; research the specific regulations for your product and the country of origin and/or destination; prepare your documents carefully and present them in a clear and orderly fashion so that customs can give them the green light; and if you anticipate problems with delays in port, ask in advance for more free-occupancy days to avoid shipping delay charges.
Basically, we can sum it up with one bit of advice and our magic word: anticipate.
"Customs duties play an important role in your international shipment. How they're determined and calculated varies from country to country"
Klaus Lydsal, vice president of operations at iContainers