How to Make Exporting Simple (part 2)
In our last blog post, we discussed the importance of a plan to ship internationally and the need to understand some of the key ideas and issues a new shipper may be faced with once a decision is made to start shipping. In this blog post, we will explore in greater detail some of the key concept you will need to know to effectively build international shipping strategy.
Understanding the key terms and concepts behind international shipping is therefore essential. For example, understanding the role of key stakeholders involved in international shipping will help you craft a strategy to begin shipping international. Another example is that shipping internationally entails more than just the costs associated with shipping a container. There are additional fees that support the infrastructure to physically move a container from point A to point B. This may include everything from fees for processing paperwork to fees for safety and security. The following outlines some of the key concepts and thoughts any shipper or freight forwarder will need to consider when deciding to ship internationally.
What is an NVOCC Anyway? Unlike other logistics and transportation industries (e.g., airlines or package delivery) that engage directly on a business to business (B2B) or business to consumer (B2C) basis, the international freight forwarding industry is a B2B2C enabled system where freight forwarders serve as middlemen for all shippers. Instead of shippers interacting with carriers directly, a licensed non-vessel operating common carrier (NVOCC) is required to obtain shipping rates from carriers and to quote a corresponding tariff (all in shipping cost) to their customers.
Quotes or Tariffs… well…Both! This process to obtain a quote from a carrier is unregulated from a pricing perspective. The US Commerce department tracks tariffs (the final cost for a shipment) and not rates. A tariff is highly dependent upon what a freight forwarder bills the client and, due to the manual nature of the industry, there is no “truecar.com” to help a freight forwarder benchmark the cost of sending freight between any two ports around the world. The result is market variability and an industry that is driven by trust and low-price competition. In other words, a quote is the cost to a NVOCC, a Tariff is the cost to a shipper, and there is nothing that binds the NVOCC to charge a shipper the cost quoted to them by the Carrier.
What is the deal with all these fees? DTHC stands for Destination and Terminal Handling Charges. These are charges collected by shipping lines to recover from the shippers the cost of paying the container terminals for the loading or unloading containers at the port of destination/debarkation (POD). Comparatively, Destination Fees are the costs charged by a port of destination/debarkation to the shipper to process containers through their facilities. Another fee to consider is “demurrage” and “detention” fees. Demurrage is charged for a full container load associated with a delay in picking up products at the POD. Detention is a fee applied for delays associated with returning a container after products are picked up at the POD. Demurrage and Detention Fees are a typical charge that a shipper is bound to pay legally.
Understanding the roles of stakeholders involved in shipping internationally, and the methods by which they obtain, provide and augment a shipper’s costs will make you are smarter consumer. Ensuring a buyer is lined up and expeditious in receiving your goods will also minimize fees charged by the carrier and POD. Go to www.xportforwarding.com to learn more about the key terms and phrases that drive the international shipping industry. Also, check out our educational resources to get even more insight into the international shipping industry.
The Xport Guide to Next-Generation International Shipping
Innovation Begins With Inspiration!
The XPort blog brings you next-generation ideas to build a lasting source of competitive advantage for your company. Dedicated to unraveling the many secrets of the International Shipping Industry, this blog will help readers:
- export goods with ease
- optimize core business services
- build strategies for generating revenue
- stay synch'ed with industry thought leaders