Hey guys!
Another day, another blog!
Today, I discovered something that seems pretty straightforward to me, as I'm in the logistics industry, but I guess for DTC brands, it might be a bit annoying in the operation. At the end of the day, all you want is for the stock to reach your warehouse or 3PL warehouse in order to fulfill and ship out to your end consumer. Here are some insights that I hope will help!
Let's start!
Factors That Build the Cost of Container Shipping
Nature of the Product
The nature of the products you ship with the carrier or airline greatly affects the cost. Products that are more dangerous and harmful to human health often come with extra handling charges, making the cost more expensive than normal products. This is why freight forwarders will ask for the commodity name and its HS code when offering you a shipping cost. In logistics, products are typically categorized into two areas:
- Normal Cargo
- HAZ Cargo: HAZ stands for hazardous products, which include liquid, batteries, radioactive materials, etc.
Container Size
When moving containers, there are only three size options available, regardless of the carrier you work with for sea movement:
- 20’
- 40’
- 40’HC (high-cube)
Note: ‘ means feet and “HC” means high-cube. Generally, 40’ and 40’HC containers have the same rate, which is higher than that of a 20’ container.
Container Type
There are two ways to define the container type. If we just look at the spectrum of the container specs purely, there are around 16 container types, but I’ll list the most popular ones:
- Dry Container: Commonly seen on the road.
- Reefer Container
- Flat Rack Container
- Open Top Container
- Tank Container
The more complicated the handling and the container type required to keep your cargo, the higher the cost will be. For example, if you book a reefer container to ship pineapples, the cost is higher because it requires electricity throughout the journey.
Location
Location refers to the origin where the goods come from and the destination where they are going. In logistics, some common terminologies include:
- POL (Port of Loading)
- POD (Port of Discharge)
- APOD (Airport of Departure/Destination)
The cost of shipping depends on the route, how popular it is, and the distance between the destination and origin.
Top Mistakes in International Shipping for DTC Brands- Not Optimizing the Packing
- When considering packing, it’s essential to think about both the master carton and inner carton. For international shipping, many DTC brands pack products into their product packaging, which is then placed into the master carton by the factory. Ensuring that the master and inner cartons fit well together is crucial. For example, if you have 1500 packs with dimensions 7×6×2 inches, you should calculate and use an appropriate master carton size like 35×30×8 inches. Using a larger carton could lead to higher shipping costs, especially in airfreight, where chargeable weight is determined by comparing volumetric weight and gross weight.
- Not Considering All Cost Factors
- When logistics companies quote to DTC brands, many overlook the fine print and mistakenly assume that the quote includes all costs, such as duties and taxes at the destination. It's essential to carefully read all remarks and understand what is included and excluded in the quote. Ignoring these details can lead to incorrect shipping cost calculations and unexpected charges on invoices. Always review all elements, from ocean freight rates to handling charges and potential surcharges.
Let me pull the example from my eBook here for your reference:
- Ningbo to Los Angeles OF: $3780/HC
- PSS: $700/HC
- Panama Canal Emergency Surcharge: USD 350 per 40’HQ (if the vessel via Panama Canal)
- T/T: 12 - 17 days
- Rate Valid: End of Jan 2025
- FOB Charges: ODOC: $75/shipment, OCCF: $50/shipment
- Pick Up Fee: $363/container, H/L: $224/bill
- EIR: $20/set, AMS: $40/shipment
- SEAL: $8/cntr, VGM: $10/container
- Telex release: RMB 400/bill of lading (if needed)
- DDP rate from LAX port to Ontario, CA 91761:
- Merchandise Processing Fee: 0.5575% of goods value (min $20.25, max $550.15)
- Customs Clearance: $125.00
- Messenger Fee: $25.00
- Pier Pass Fee: $79.68
- Handling Charge: $72.8, Import Service: $65.00
- Delivery Charge: $833.80 (fuel excluded)
- FSC - Fuel Surcharge: 35% of trucking rate
- Chassis Fee: $70 per day (2 Days/Container included. Additional days may be applicable at $35 USD/Container/Day)
- Harbour Maintenance Fee: 0.125% of goods value
- Port Congestion Fee: $150 if pickup from Maher, APM, PNCT & NYCT, $200 if pickup or return to Global Terminal
- Pre-Pull Fee: $300.00
- Storage Fee: $65.00 per night
- ISF: $11.20
- ISF Entry Bond: $75
- Single Bond: $585
**NOTE:**
- Main Ocean Leg:
- These rates apply to all containers up to 38,000 lbs or 17.2 mt. Overweight charges can apply to containers that weigh up to 44,000 lbs. Shipments will be rejected if containers weigh over 44,000 lbs.
- Transit times are approximations provided by the carriers.
- Quotes are based on space availability. If space is not available at the time of booking, customer service will give you the option to upgrade to another carrier with available space at a new rate or to wait for space to become available on the original carrier. This may affect transit time.
- Rates exclude import duty and taxes e.g. VAT, HMF (US), MPF (US).
- Simple customs entry included. ATA Carnets, Temporary Import Bonds subject to surcharge.
- Rates are based on general cargo and do not apply to dangerous goods, out of gauge, perishables, ship spares, pharmaceuticals, etc.
- Delivery Leg:
- For US imports, a continuous bond must be on file or single entry and ISF bond fees apply.
- Duty and taxes must be paid before release of cargo.
- Customs examination fees (if applicable) not included.
- Chassis fee includes 2 days. If required for additional days, a fee of USD 35/day will be assessed.
- SOLAS: upon customer request at time of dispatch, we can arrange to have containers weighed empty and/or loaded and provided email photo(s).
- USD 85 Per Chassis Repositioning.
- USD 150 Hazardous commodities must be verified prior to dispatch.
- USD 175 Refrigerated container.
If you ignore the remarks, you might end up with incorrect shipping cost calculations, resulting in invoice discrepancies.
- Choosing the Wrong Shipping Provider
- The logistics industry is complex, not just due to its nature but also because of varying service levels among providers. Some logistics companies might offer low prices with extended delivery times to attract customers. However, once your cargo is onboard, changing providers is usually not an option, and you might face hidden costs that must be paid to release your goods. Selecting a reliable shipping provider who offers transparent pricing and dependable service is crucial to avoid these pitfalls.
Final Thought
Logistics knowledge is vital for DTC brands, yet many overlook this aspect and place complete trust in their logistics companies. DTC brands should educate themselves about logistics to effectively manage costs and ensure smooth operations.
See you in the next blog!