Shipping Your Goods – The Real Costs and Being Aware of EXW

A quote from a freight forwarder for a pallet of goods from Fuzhou.

The total cost of sea freight is just $98 (I paid more recently to have a box shipped from Vancouver back east to Toronto!). However, look at all the miscellaneous fees totaling $383.  The bulk of this is for the truck freight to get the goods from my supplier’s factory to the port. Yup. Just like in Canada or any other country, overland freight is expensive.

Most of the other fees are associated with preparing various documents such as the Bill of Lading. Adding to the cost, I can expect to be hit with about another $150 in fees when the goods arrive in Canada from either the Freight Forwarder and/or the receiving warehouse. Ultimately the total cost of freight will be around $631 with only $98 of that cost being for sea freight.

Be Aware (or beware) of EXW Freight

A big reason why the costs above are so high is that the shipping terms were EXW Fuzhou (read up on your favourite Incoterms here). What this means is basically that the factory will manufacture all of the goods and I have to come to their place to pick it up. They’ll handle almost nothing in terms of freight. It’s akin to buying a bed on craigslist with the stipulation “Must pick up”.

Now contrast the term people are more familiar with, FOB xyz Port. For an FOB shipment, say FOB Ningbo (a major port in China) the supplier will drive the goods from their factory to the local port, load it on the ship, and pay all of the document fees. I’ll pay for the sea freight and all of the fees associated with the shipment once it arrives in my port. Following the same craigslist example, it would be like buying a bed on craigslist with the stipulation “Will drop off at your house, but I won’t help move it up your stairs and into your bedroom”. In my case, if the shipping terms were FOB Ningbo instead of EXW it would have meant I paid $98 in sea freight + $150 handling charge once it arrives instead of a whopping $631.

EXW Appears to be Increasing In Popularity

In my last few dealings with suppliers, I have been quoted EXW almost every time (or a cleverly disguised ‘FOB xyz’ with a $150 handling charge). In fact, prior to this year, I can’t recall every having been quoted this. This could simply be a complete fluke or it’s a sign that more and more suppliers are making this their standard shipping terms. I suspect it’s the latter. My belief is that Chinese suppliers are slowly becoming more and more transparent with their pricing due to the internet and higher competition. In turn, just like the Airlines or postal service do with their “fuel surcharges”, Chinese suppliers are finding ways to create different forms of revenue outside of their simple product prices. Once again, as a vigilant entrepreneur you must find ways to negotiate outside of the box.

Have you encountered some creative ways suppliers are charging to create revenue outside of their pricing? If so, please comment below.

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