This time we are talking about t.i. “Hidden costs”
Today we have prepared for you a set of questions most often set up by a company dealing for the first time with importing and transporting small consignments of goods, i.e., groupage shipments (LCL) from China or other Far Eastern countries.
So, in our server, we often come across the questions if you want: I have goods from China, what now? How should we import it? The Chinese say that I send the goods to Koper and that I need a freight forwarder? It's a groupage (LCL) shipment. Can you help me?
This article will focus mainly on the so-called "hidden costs,” which will be imported to new importers.
Irregularities in CIF delivery conditions often occur in the case of groupage shipments from the Far East. The CIF clause includes costs related to goods, insurance, and freight to the destination. The CFR clause includes the costs associated with the goods and the fare to the destination, where agents often offer reduced costs related to the delivery of the goods.
Far Eastern companies also gain business by offering free or affordable transport to cargo owners and agree with a local agent at the final port not to hand over the cargo until the consignee pays the costs associated with supplying the goods hidden under other goods names such as: China Import (Service) Fee, THC surcharge, ISPS surcharge, Eco tax, Surcharge, Transfer fees, Gas Measuring Exchange Rate, Incentive Refund, LCL Services Charge, Handling Fee, Refund Delivery Order, Agency, CAF, Discharging, Refund or Far East Import Surcharge. Although the importer thinks that he ordered the goods with the costs already included covered by the CIF or CFR delivery condition, he ultimately pays, separately from the selling price of the goods, an additional amount related to the delivery of the goods, but under other names such as costs incurred. Cover delivery terms CIF and CFR. There is a possibility that part of the cost of transporting the goods on the invoices is listed under the fare and part of the cost under other names.
You can avoid these inconveniences. When concluding a contract with a supplier, you agree that your goods will be delivered at FOB parity. FOB parity means free on board. Your business partner from China arranges everything necessary in its area, and transport and customs formalities are arranged for you by freight forwarders such as RCM.
Namely, the sender offers you seemingly affordable transport to Koper. Still, when the shipment arrives, we often find out that the shipments are being transferred to warehouses in other parts of Slovenia. The local agent will charge you additional unknown costs, which can be up to twice the amount of the fare offered by your supplier in China.
The local agent who translates the goods may charge you additional costs unknown to you. The so-called hidden fees can also be twice the amount of the fare offered by your sender. Hidden costs can be up to EUR 300.00 / M3. Part of these costs is then usually reimbursed by a local agent to cover the fare in China.
At this point, we advise you to agree on the terms of the FOB when concluding contracts for the supply of goods from the Far East. Then, we arrange transport, customs clearance, and delivery to your home. That way, you have a familiar financial structure.
For more information and preparation of an informative offer, we are available at firstname.lastname@example.org.
We would like to know more about the delivery conditions. We wrote about the latest Incoterms 2020 clauses for you here:
INCOTERMS 2020 CLAUSES