All About International Ocean Sea Freight & Step by Step InstructionsOctober 25, 2018 in Blog, Importing, Shipping & Logistics
In this article, I’ll give an overview of Ocean Freight and also the step-by-step instructions you need to take to arrange for ocean freight and actually receive your goods.
Related Listening: Episode 165 – Shipping from China Made Easy, Interview with Freightos
Air Freight/Air Courier is Reasonable When Ordering Samples
The first thing to consider with Ocean Freight is whether you are actually better off shipping via air freight or air courier. There are some significant differences between air freight and air couriers that we discuss in our article here. But the general rule of thumb is that for shipments under 200 kgs or so shipping via some air method opposed to sea freight is almost always cheaper and far more convenient. Air shipping rates generally range from $5/kg-$10/kg but do not have the same high fixed costs common with ocean freight.
How Much Does Ocean Freight Cost?
For any shipment over 200 kgs or so, ocean freight is normally your cheapest option. Ocean freight has high base costs but it scales very well. For example, your ultimate costs to ship a 20 kgs box via ocean freight maybe $300, but for 200 kgs you will pay $310, for 2000 kgs, $390, etc. For air freight, there is almost no scaling. A 20 kgs box will cost you $100 and a 40 lbs box will cost you $200.
Sea Freight comes into two varieties: Full Container Load (FCL, 20’ and 40’ containers) and Less than Container Load (LCL). Further, containers come in three basic sizes: 20′, 40′, 40’hq (40′ high cube).
LCL freight simply means you have one or more pallets put into a container along with other companies’ goods. Full containers mean you get the full container to yourself. Simple, right? Any freight forwarder can arrange for full container shipping or LCL for you.
Full containers cost anywhere from $2000-$4000 for a 20’ container to North America (always cheaper to the West Coast) and LCL is pretty close to fractionally equivalent of how much of the container you’re using up (if you’re taking up 25% of the 40’ container, you’ll pay around 25% the cost of a 40’ container). See the above image for sample sea freight quotes from October 2018.
Sea freight can be delivered to most major ports. Vancouver (Canada), Seattle, San Francisco, and Los Angeles are the big ones on the West Coast. Live in a landlocked part of the world like Denver? No problem – you can still ship a container there but your container will simply be put on a train and railed into your city, although prices are slightly more expensive for inland delivery (although still extremely reasonable).
When Should You Ship Full Containers (FCL) and Less than Containers (LCL)?
When should you use LCL ocean freight and when should you use FCL ocean freight? The obvious answer would appear to be that you should ship full containers when you have enough stuff to fill the container and LCL, otherwise. This isn’t quite true.
From a financial perspective, a full container 75% or greater full is normally cheaper than shipping LCL (in other words, LCL has around a 25% pro-rated surcharge). However, there are two other important considerations as well. First, LCL has transit times around 1-2 weeks longer than FCL. That’s because the freight forwarder has to pack your items and unpack your items with other people. Second, LCL cargo is more prone to loss and damage (although it’s very rare) because of this additional handling. If time and care are important for you, shipping even a half empty container can sometimes make sense.
Ocean Freight Has High Fixed Costs and Many Surcharges
With Ocean freight, there are a lot of surprise fees when the shipment comes to your country. When you receive an invoice from your freight forwarder you may be shocked at how many fees exist outside of the actual ocean freight. Below are some sample fees you can be expected to pay:
Dock Fees: $50-100
Freight Forwarder Administration Fee: $75-200
Security Fee: $50-100 (normally on Full Container Loads)
Customs Clearance Fee: $100-200 (plus applicable duties/taxes)
Final Truck Transportation from the bonded warehouse to your doorstep: $200+ (unless you pick up your shipment yourself)
The last two fees, Customs Clearance Fee and Final Truck Transportation, you can technic and do yourself. In reality, no one ever does this themselves.
These are just the fees once your shipment arrives in your home country. They do not include the fees from within China (which can vary significantly depending on what your incoterms are) or the actual cost of the sea freight itself.
Ocean Freight is Very Different From What You Are Used To (Sort Of)
Most of us are accustomed to shipping things via USPS, FedEx, etc. and other small parcel carriers. Ocean freight at first seems very different from these types of services, but when you think about it more deeply, you’ll realize they are actually very similar.
If you are shipping something via USPS, you know that you have to drop the item off at a post office. With Ocean Freight it’s the same way: someone has to drop it off at the post office! Except, in this case, the port is the post office.
If you imagine the United States for a second, you know that Kansas is very far from the ocean. So to ship a few pallets to, for example, the Port of New York, you somehow need to have the goods shipped up to New York. The same thing is true if you order something from your supplier in Chengdu (central China) to the Port of Shanghai.
Thankfully, you don’t actually have to arrange with some random Chinese truck driver to pick up your goods. Most freight forwarders are happy to arrange to pick up your goods from your Supplier’s factory. But it will cost more money. That is why things called Incoterms are very important. For example, if you and your supplier agree to the shipping terms FOB Shanghai, this means your supplier will pay for the cost of having your goods shipped to the Port of Shanghai. If you agree on EXW Chengdu, you will pay for it (see my warning on EXW here). Shipping goods hundreds or thousands of miles via truck isn’t cheap, no matter what country you are in, so always be aware of this!
Once your goods are shipped to the port, they get put on a container, and the next time you hear of them should be when they arrive in your home country.
Ocean Freight (and Air Freight) Require the Use of a Freight Forwarder
So how do you actually book sea freight? You need something called a freight forwarder (the same goes for air freight as well in fact). A freight forwarder is essentially a broker who buys space on ocean liners for containers. You cannot book this space directly on ships yourself – you need the freight forwarder.
Freight forwarding is HIGHLY competitive and there are thousands upon thousands of freight forwarders. There are now two very popular brokers for freight forwarders (in essence, they’re brokers of brokers) called FlexPort and Freightos. You can get a quote for nearly any shipment. However, the easiest way to ship your goods is to simply have your overseas manufacturer arrange the freight for you.
How Long Does Ocean Freight Take?
SeaRates.com is my absolute favorite site for estimating transit times and also getting freight estimates. In general here are some rough shipping times from China to various ports:
Shanghai to Los Angeles: 18 days
Shanghai to New York: 35 Days
Shanghai to London: 30 Days
These times vary wildly depending on the route and other factors but are good approximations. They also do not consider container loading and unloading times which can easily add many days (and sometimes weeks) onto these transit times.
When Your Shipment from China Arrives to Your Country
When your goods are close to arriving in your city, your freight forwarder will give you a call or an email to let you know how much you owe them (more on this later), an ETA, and where to pick your goods up.
Keeping with the USPS example, you know that if you’re not home when the mailman tries to deliver your package, you will have to pick it up at the post office. The same thing is true for ocean freight except they won’t ever try to deliver your package to your home. You always have to pick it up from either the port or a nearby warehouse.
If you ordered a full container, you will almost certainly pick your container up at the port. In my case, this is the Port of Vancouver.
If you ordered LCL freight, then remember you have only a fraction of that container with a bunch of other people. Your goods could be at the very back of that container, so somehow they need to facilitate a way for you to get those goods. Time at the port is very expensive so they’ll move your container to a nearby warehouse (nearby could mean 30 miles away) and destuff the container, in other words, they’ll take your goods out and put them in a warehouse to make for easier and cheaper pickup. In the graphic below, you can see that the goods are moved from the Port of Vancouver (where the container gets unloaded), moved to a nearby city (Richmond) and then moved to a warehouse.
Continuing our post office example, you know that the post office will not hold your package forever. Eventually, they’ll simply return it to the sender. The same is true for ocean freight. You generally have five free days of storage. After thi,s they will start charging you for storage (for a container it’s about $100/day and for LCL Freight it is around $50 a day, depending on the size of the LCL freight).
The chances are good that you don’t actually want to pickup your goods yourself from the port. In this case, let your freight forwarder know the ultimate address you want your goods delivered to (ideally before the order actually ships) and they’ll be happy to arrange overland trucking to that ultimate destination. Be warned that overland freight for even short distances can often be almost as much as ocean freight for thousands of miles (I recently paid $2000 for a 20′ container to be shipped from Shanghai to Los Angeles and then $1100 for it to be shipped 30 miles from Los Angeles to San Moreno).
Your Goods Are Being Held Ransom at This Point
So your goods have arrived in your home country (great – you know the boat didn’t sink!), however, they are now being held ransom in a sense. Three parties need to be paid, and the warehouse or the port will not let you pick up your goods until you have paid these three parties. These three parties are:
- Your Supplier
- Your freight forwarder or shipping agent
Paying Your Supplier
At this point, you should have already paid your supplier. However, your goods are like a car: you need to have the title for them in order to claim ownership. An original Bill of Lading is essentially a title to the goods. Your supplier will mail you 2 or 3 physical copies of this (photocopies are not permitted – they must be original) and you must give one of these Original Bill of Ladings to the freight company in your local country (normally in the city of the port, but not always). Your supplier may also Telex Release the goods to you, which basically means they telephone the company and say “Please release the goods to Dan’s XYZ Company” and forgoes the need for an OBL. You probably want to have your supplier telex release your shipment as opposed to sending you an original Bill of Lading.
Paying Your Freight Forwarder
The freight forwarder will also ask you for a small payment at this time, which will include the ocean freight costs and various other surcharges. When you pay your money to the freight forwarder, confirm with them the location of the warehouse with your goods, if you shipped LCL and are picking up the goods yourself. Also, ask them for something called the Cargo Control Number. This is basically the unique ID of your package. The warehouse will not be able to find your items without it. When the Freight Forwarder initially contacts you to tell you that your goods will arrive soon, they should forward you a document telling you both the ultimate location of your goods and the cargo control number, like seen below.
The final thing you will have to pay for is customs. This actually isn’t quite true: you may not actually have to pay for customs (if your goods have a 0% tariff) but you will have to clear customs.
Customs clearance is a complex topic. Basically, countries require a record of all goods entering the country. Most goods, especially those from China, have some percentage of tariff/duty associated with them, normally in the 1-15% range, although many actually have 0% tariff/duty. Regardless of the amount of duty owed, you have to fill out a customs declaration form. A customs broker can handle all of this for you, for approximately $150-200 + applicable duties. There are literally thousands of customs brokers, but the one I use is Pacific Customs Brokers (they can handle Canadian and/or U.S. Clearance). Your freight forwarder may also be a registered customs broker as well.
Once you have cleared customs, the local customs authorities will notify the warehouse holding your goods something along the lines of “Dave Bryant has cleared customs- you can release these goods to him”.
You’ve Paid Your Ransom- You Can Pick Up Your Goods!
Once you’ve paid your three ransoms, you can finally pick up your goods. You simply go to the warehouse (in the case of LCL freight) or the port (for containers) where your goods are and pick them up.
If you are picking up LCL freight, the warehouse may charge you $25-50 for a dock fee which is often only payable in cash, so bring cash with you just in case. Remember that your goods will likely be on a pallet. If you have a vehicle, like a pickup truck, that you can simply load the pallet onto it, This is the best arrangement. On the other hand, if you have a small car you could be disassembling the pallet for a while and stuffing your car with boxes.
Want to Ship Your Goods to Amazon?
Are you looking to ship your goods directly from China to Amazon via ocean freight? Good news: we have a couple of articles make your life a bit easier:
Shipping LCL or FCL shipments isn’t particularly difficult but you need to be aware of some of their labeling requirements to avoid having your shipment rejected.
Hopefully, this gives you a good overview of how international sea freight works. Importing from China can be intimidating the first time (or second time) you do it. But once you understand the nuances of sea freight, it will become second nature. If you’re still struggling, EcomCrew Premium includes access to our full length Import from China Like a Pro course that gives more detailed recommendations on how to save on sea freight time and costs . If you have any other questions about sea freight, feel free to comment in the comments section below.