The ultimate guide for sea freight and shipping from China

By Fredrik Grönkvist

Figuring out how sea freight works is challenging particularly for small businesses. This guide is a well-rounded introduction to shipping and sea freight.

Unlike most sourcing agents I didn’t have a clue about how sea freight worked by the time I set up my first business. Another thing that struck me was the fact that it was, and still is, very hard to find decent information on how sea freight and shipping from China is actually working. I know that this is a big concern for small businesses importing from China and I receive questions about this topic on an almost daily basis.

My hope is that this article is going to provide the reader with a well rounded introduction to shipping and sea freight. In this article, I’ll introduce the reader to the shipping process and some of the things that you better keep an eye on when importing from China.

Incoterms 

Shipping Incoterms are international standard codes that decide when and where cargo shall be transferred between the supplier and the importer.Incoterms may look a bit confusing at first sight, but they are not hard to get at all. Basically an incoterm consists of two components: a three letter code and a city name. The three letters incoterm code specifies “how far” the supplier shall ship the cargo. Basically how much of the shipping you pay the supplier to handle. Based on the incoterm you select, you can let the supplier handle the shipping of products to a nearby port in China or all the way to your front door. I recommend inexperienced importers to select an incoterm that takes the cargo as far as possible. 

FCL & LCL shipping

Sea freight is not exclusive to those importers who purchase large quantities from China. If you want to import by the container then FCL (Full Container Load) shipping is the right choice, it’s also the cheapest mode of transportation if counted by cost per kilogram. However, for smaller buyers LCL (Less than Container Load) is available. In fact, you can basically ship cargo with very small volumes - even less than one cubic meter. See an in depth guide to FCL and LCL shipping here.

Who’s managing the sea freight?

There are two options here, either the supplier or you. I’ll begin with explaining the latter. Letting the supplier manage the shipping is common among inexperienced importers and even we let the supplier manage the shipping from time to time. It’s very simple and all you need to do is to tell the supplier that you want them to ship the cargo as CIF “Port of destination” (you actually have to specify which port you want it to be delivered to) and they’ll do the rest. The downside is that you’ll probably end up paying a bit more than if you would have managed the shipping by yourself.

As mentioned, you can also manage the shipping by yourself. This doesn’t mean that you have to swim all the way to China, pick up your cargo and then swim back home. It can be done from the comfort of your home and office by hiring a shipping and logistics agent. These companies are everywhere and they tend to offer discounts in return for a fairly small yearly service fee. The shipping agent can then manage your shipping,  from the Chinese supplier to a nearby port or a specific location within your country (i.e your warehouse).|
Do I need to pay any fees or taxes in China? 
No, you don’t need to pay any “export tax” when importing from China. However, you will need to pay for transportation to the port of loading in China and the cost for export clearance papers. Both of these are included in every incoterm from FOB (Free on Board) and above so you don’t need to even bother with this unless you select EXW as your incoterm.What about insurance?Insurance is included when you select CIF, that’s why it’s called “Cost Insurance Freight”. However, the definition of the insurance may vary between different shipping companies. When you let your supplier manage the shipping you are not in control of which shipping they select, which is probably the cheapest. I suggest that you contact a local shipping agent if you want to know what the insurance actually covers.Delivery timeThe transit time from China to most locations in Africa, Europe and the US is roughly 29 – 35 days. However, keep in mind that it can take a few days – sometimes up to a whole week – before your cargo is loaded in the port of loading in China. The same thing is true in the Port of Destination, it usually takes two to three days before your cargo is cleared and ready for pick up.

Sea freight is indeed quite slow and this means that importing from China certainly requires a lot more long-term planning compared to domestic product purchases. This has also been a major cause for the recent surge in reshoring in Europe and the US. In general I recommend businesses to place an order at a minimum 3 months before they need the products in their warehouse.What happens when the cargo arrives at the Port of destination?
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