A very common question that we’re asked at Shippo is whether it’s cheaper for our customers’ suppliers to ship the goods to a UK port of their choice. Naturally, the assumption is that it would be as they wouldn’t have to pay for the sea freight. Given the fact that the goods would be in the UK surely there’s no more to it than arranging for delivery? Unfortunately that’s not the case – and here’s the quick answer why.
There’s no such thing as a free lunch
Having your goods sent to the UK port (on CFR or CIF shipping terms) can seem like the easiest and cheapest way of importing goods but you must try to identify the full costs that you’ll be liable to before agreeing to this shipping method. To stay in business, Chinese shipping agents need cargo to ship, and the easiest way to get it is not to charge your supplier for their service (or in some cases pay the seller to ship their goods!). This means that before they have even started the process they are working at a loss. However, they do have the cargo. Once the ship arrives at the port in the UK the Chinese Shipping agent’s counterpart will make their money back by billing you. They will charge China Import Service Fees and other documentation costs that can be through the roof.
It’s not just the fees from China that you’d have to pay, you’d have the UK fees to pay too. When your supplier agrees to send your goods to the UK all they mean is they will “pay the freight cost”. This leaves you with all the UK based fees such as port handling, customs clearance, documentation in addition to any warehousing or delivery fees.
This is a very brief overview of a tricky situation; if you want to understand all the risks and hidden costs better we’ve created a detailed post explaining this process in depth here.
Too good to be true
Often you can get an inkling that things may not be as they seem when your supplier asks you which port you’d like the goods to arrive at. We’ve been told that Chinese suppliers have agreed to send their goods to small fishing ports that have never even seen a container ship! The likelihood is that your goods will arrive at Felixstowe, Southampton or potentially London (regardless of what your supplier thinks).
Is it all bad?
There are occasions when CIF shipping terms can work well but it’s almost impossible to fully control your costs on the first occasion. If you or your suppliers are dead set on using CIF shipping terms then we’d suggest that you try to identify exactly what the costs would be when the goods arrived in the UK. Alternatively, if you think that your supplier sending the goods to you delivers the best deal you could ask them to send the goods to your door on DDU (Delivered Duty Unpaid) shipping terms so there’s no confusion.
What can you do instead?
Instead of having CIF shipping terms arranged, it is recommended that you ask your supplier for FOB or EXW shipping terms (explained here) as you are then clear on exactly what your responsibilities are therefore you can get a better gauge for what you are going to be paying on arrival to the UK. You can then get a cost from a shipping company (like ourselves) to ship the goods to the UK, clear customs and deliver the goods to you. This way your costs are transparent and you’re not going to be hit with any nasty surprises!
