SHIPPING YOUR EQUIPMENT FROM OVERSEAS
Comprehensive Guide on Sea, Air, and Inland Freight
What you see written below is an extract of knowledge, based on my own experiences with shipping equipment, primarily out of China and the USA, and into Australia, including the inland component on both sides of the journey. I am by no means an expert on shipping and freight, nor do I want to be. I have an expert shipping agent for that! So let’s get you some insight into what happens when you need to get your gear from there to here.
Got the Basics Sorted – Now What?
So, you’ve decided to go ahead with that new toy of yours – the brewery or distillery. Right?
- Business plan; check
- I have my eye on premises; check
- Development Authority (DA) submitted; check
- Equipment sized up and priced; check (Note: I’d be happy to go over your quote if you like)
- Finance; check. Maybe…
Hey, what about getting the gear from wherever it’s being manufactured, to your new premises? You may be thinking: we will ship bits from China, the USA, Italy, maybe the UK. When it comes, we’ll grab the forklift, unpack it all and place it where we need it.
Okay let’s have a closer look at those ideas. There are some things you should know.
Understanding Incoterms®.
It is important to understand that shipping begins at the factory and ends at your premises.
When a supplier gives you a shipping price, it is usually accompanied by an abbreviation: have a look at the shipping term they use on their quotation (commonly called “Incoterms”). Some of the common Incoterms we use are FOB, CIF, EXW
So what do these terms mean?
The Incoterms® are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions. Of primary importance is that each Incoterms rule clarifies the tasks, costs and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will allow for a smoother transaction by clearly defining who is responsible for what and each step of the transaction.
DHL Basic Overview of The Incoterms® 2020 Rules has a great explanation with explicit graphics.
As you can see in the DHL incoterms model, the Incoterms® 2020 rules are grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.
The seven Incoterms® 2020 rules for any mode(s) of transport are:
EXW – Ex Works (insert place of delivery)
FCA – Free Carrier (Insert named place of delivery)
CPT – Carriage Paid to (insert place of destination)
CIP – Carriage and Insurance Paid To (insert place of destination)
DAP – Delivered at Place (insert named place of destination)
DPU – Delivered at Place Unloaded (insert of place of destination)
DDP – Delivered Duty Paid (Insert place of destination).
The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:
FAS – Free Alongside Ship (insert name of port of loading)
FOB – Free on Board (insert named port of loading)
CFR – Cost and Freight (insert named port of destination)
CIF – Cost Insurance and Freight (insert named port of destination)
In practical terms, you need to be sure you’re getting the full picture of how your new toys (and rather large investment!) are going to get from the manufacturer to your doorstep.
Is my quote a “locked-in” price?
In the shipping game, each quote is an estimate. There are many moving parts that make up the journey between the manufacturer and your premises, and each moving part is subject to seasonal events (Christmas, Easter and other major holiday-type events), environmental, economic and political changes. These changes reflect back on the consumer in the form of price changes (mostly increases).
The parts of the journey which are most likely NOT to change, or to change very little are generally:
- Government fees and charges
- Local shipping agent’s fees and charges
- Local freight rates
- Demurrage / storage rates
What we have no control over are the costs that are affected by international events. These can be very volatile:
- Sea Freight
- affected by health outbreaks (e.g. COVID), dock strikes, fuel prices, outbreaks of violence, etc. There is no way to predict what is going to happen between the time you get your first shipping quote, and the day you have to pay the final invoice
- Peak periods, much the same as holiday peak periods, can in some cases, double or even triple the cost of your sea freight. Major peak periods are normally October till around February, and around Easter.
- Air Freight
- Much the same as Sea Freight
- Inland Freight
- Local fuel charges
Now let’s dive into each of the transportation methods.
What do I need to know about Sea Freight?
First off, sea freight as you would probably guess, is a slower mode of shipping than air freight. Both have their pros and cons.
You may have noticed that when you speak to someone about sea freight (or “shipping” in general), one thing that is almost always mentioned is “containers”. Containers come in various sizes and configurations. What we would be mostly concerned with for shipping equipment via sea freight are things like:
- How large the piece of equipment is that we’re transporting (dimensions)
- What each item weighs after being crated for transport (see LCL in the “ Choosing Container Configurations” below)
- How many items there are
These will determine the size and quantity of the containers to use to find the most cost efficient method of transporting your goods between origin and destination ports.
For instance, a larger brewery could quite easily take up one or more 40’ containers. Each container will be costed at the going price on the day we get the quote. Consequently, a 40’ container costs more to ship than a 20’ container – it comes down to the size of the ship and how many containers the shipping line can fit on board.
Choosing Container Configurations
There are various configurations of containers we can use for different types of loads, e.g. loads more bulkier than others.
If the load is small enough, it may require only some space inside a container. In other words, you can share space in a container with other goods destined for someone else. This would commonly be referred to as a LCL or Loose Container Load. It follows that this is a cheaper way of transporting goods by sea than hiring a full container for something that doesn’t need all the space (within reason).
Generally, if you fill a 20’ or 40’ container with your equipment, the dimensions and weight of the equipment is of no consequence. The pricing is done by container size and configuration.
If you equipment is too large for even a 40’ or 45’ container, the shipping agent will source a frame. The frame is basically a container without a roof – or sides – or both. It’s a skeleton to which the equipment is secured. Frames are typically more expensive than regular enclosed containers, due to several factors:
- The frame handling equipment may differ from regular container handling equipment at different ports
- Frames take up more space on the ship than regular containers
- When goods are removed at different ports, the frames may have to be taken off then replaced on the ship in order to get other containers offloaded. The ports would need the necessary equipment to do this.
- Frames will typically need special types of transport when inland freight is required, such as trucks or trains
What about Air Freight?
Air freight is mostly costed by dimensions and weight: cubic meters and kilograms. There is also a height consideration that affects goods transported by air. If the packaged goods are too tall for say the loading door of the aircraft, it may have to be loaded in another section of the aircraft, and that could result in higher costs. Generally, air freight is more costly than sea freight. The obvious advantage of air freight is shorter delivery time: a week as compared to several weeks at sea.
And, Inland Freight?
Trucks and trailers are a common and effective method of getting your equipment from the destination port to your premises. If the final destination is a rural area, an inspection is most likely to be mandated. This is called a tailgate inspection. It attracts a fee.
The alternative is to put the goods on a train; however some container companies are reluctant to send a truck somewhere just to collect their container/s. It is far more cost effective to use a trucking company to take the goods to a site, offload the goods, then return the container as part of a round trip.
There are a few methods of delivering inland freight by truck. Here are the ones we commonly use:
- Truck arrives at premises; customer offloads the container while it’s still on the truck. Driver waits one hour (typically) before returning the container to the depot. If the load is not out of the container within the first hour, the trucking company will charge the end user a nominal rate per hour for the extra time taken to offload.
- Truck arrives at premises, offloads the container on the ground, leaves the premises (perhaps to deliver other loads). Customer has more time to offload the goods – sometimes a couple of days. Truck returns at a predetermined time to collect the container and return it to the depot. Again, if the container is not unloaded by the time the truck arrives to collect it, the trucking company will charge a nominal rate per hour for the extra time taken.
- Goods are offloaded from the container at the destination port and loaded onto the truck (loose load – secured of course!). Truck delivers the loose items, which the end user has to unload on premises. The one-hour timeframe limit and nominal rate per hour for the extra time taken to offload apply here too.
The Trip Between Factory and Destination
After your equipment has been manufactured, the various components need to get to the nearest port so they can be loaded onto a ship. In the case of air freight, the same applies to get your goods to the nearest airport.
When your equipment arrives at the airport, it will have to be transported to your premises after being cleared by customs.
In both cases, there is documentation to be completed by the sender (manufacturer) and fees paid to get the goods onto the transport and off on its journey.
When the goods arrive at the destination seaport or airport, again there is paperwork to be completed, customs clearance, perhaps customs (Australian Border Force (ABF)) wants to inspect the load for their own reasons. Everything here attracts a fee.
Once your new toys have cleared customs, they will need to be transported to your premises. In Australia, this is normally conducted using a truck or several trucks as described above.
Do I need insurance?
When you spend a good sum of money on investing in your future business, you’d want to be sure it is in good order when it arrives. If something happens along the way, you would want the problem resolved, right? This is where transit insurance comes into its own. For the relatively low cost of transit insurance, if say your container falls off a ship (yes, we know this is known to happen!), you’re covered. Dents? Covered. Breakages? Covered. You probably know all of this, but it’s worth noting, because this is often a forgotten factor when budgeting for your business.
Australian GST
Once the shipment arrives in Australia, the ATO will determine the actual cost of the goods, according to their guidelines, and current rates of exchange. They will apply GST to this price. This is one of the reasons why a shipping quote is always an estimate, not a hard and fast quote.
What about Import Duty and GST on imports?
As our imports are mainly from countries like China and the USA, the free trade agreement between Australia and these countries means that you don’t pay import duty on new manufactured goods. A good place to find out information on what goods attract import duty and what doesn’t, start here:
Australian Business Regulations – Export and Import Laws
Almost everything you can think of to import is classified into categories, and each item (or group of items in some cases) has a reference number attached to it. That number will tell you how much import duty (if any) you will have to pay on it when it hits our shores.
The Tariff Classification “30,000ft” overview provides high level information on tariffs and how to use them.
Schedule 1 provides important information on which countries attract Customs duties, and which countries and places that attract special tariff rates.
Schedule 3 is where all the tariff information for specific goods can be found, including tariff numbers and tariff concessions. For instance, if you’re importing beverages including undernatured and denatured ethyl alcohol and other spirits, you would use this tariff table to find out at what rate you are likely to pay in Customs Duty.
How does shipping work if I buy equipment through Synergy Custom Solutions?
When you purchase equipment through us, we take care of all of the above for you.
At Synergy Custom Solutions we use trusted shipping agents / freight forwarders to take care of the logistics of putting together simple or complex shipping journeys, making sure the goods are shipped in the most cost effective, expedient way. Our shipping agents ensure that the ship booked to bring your goods to Australia is on the shortest route between originating port and destination port. This saves a lot of time on the water, and in turn reduces the risk of damage or loss to your investment.
A shipping agent or freight forwarder is pretty hard at work conducting these tasks not only for Synergy, but for all their other clients too. It’s what they do. While a shipping agent is busy looking after the shipment, we look after our customers’ interests by communicating frequently with them so they always know where their shipment is on its journey. We are well aware of the things in a customer’s world that a shipping agent wouldn’t know or ask about: marketing plans for instance, launch plans, social media releases, supply deliveries and other expectations that all fit together like a puzzle to make a brewery opening, or launch a success. Any or all of these things could be affected by delivery delays for whatever reason that may occur, and no entrepreneur wants to disappoint their potential customers. We want our customers to be as prepared as possible, so they can plan around their equipment delivery.
Our communication model extends to things like communicating to our customers if a shipment is going to be late and the reason for the delay, even if it means we take some hard words from the customer about something we have no control over: weather, dock strikes, Covid, etc. When the shipment hits port, we find out what’s going on at the docks at the time, so we can communicate reasonably accurately how long it will take to move the goods from the ship to the agent’s yard, through customs, to be released for loading on the truck and delivered to site.
We know that preparations for a delivery may include hiring lifting equipment and the scheduling involved with that task: ensuring that there is adequate staff on site to assist with offloading so that activity is completed in as short a timeframe as possible. Staff is not cheap, so payment for getting people in to help needs to be factored into the delivery / offloading exercise. To help our customers plan this, we make sure we stay close to the truck driver’s schedule, so we can predict reasonably well when the truck is likely to arrive on site.
Questions?
I hope you’ve enjoyed reading this article. There is so much more to shipping and freight than meets the eye. If you have any questions, or need clarification on anything written here, please contact me any time using the form below.
Gavin van Vuuren
Director, Synergy Custom Solutions
Please note that the organisations referred to in the article sometimes change their website links. If you find that a link is not working or the information in the link has changed significantly from what we intended to show you, please let us know. We will rectify it immediately!
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