DOOR TO DOOR FREIGHT SERVICES IMPORT GUIDE
If you are intending to import from an overseas supplier for the first time here’s a step by step guide on what you need to do to get the goods from the overseas supplier to your door here in New Zealand.
The first thing to determine is on what basis the overseas supplier is quoting their price to you. You may have come across 3 letter acronyms such as FOB, CFR, CIF, DDP, DDU, and FAS etc. These are Incoterms & are vitally important, as they determine when the supplier’s cost & liability ends, and yours begin. To give an example; if a supplier quotes FOB terms, they will take responsibility & bear the costs for the goods to be loaded “Free On Board” the vessel. In other words they will pay for the goods to be delivered from their factory, to the port, and any terminal handling costs at the portl, including export documentation fees. If they quote DDP that means they will deliver to your door, and pay all duties and taxes. (Please refer to the Library section for full details regarding Incoterms)
Having obtained a price form the overseas supplier including the terms of trade you then need to ascertain what the additional costs are going to be to get your goods from your overseas supplier to your door. To be able to give any real idea of costs, any freight company needs some fairly accurate details including terms of trade, a detailed description of the goods you intend to import & weights & dimensions of the consignment. The ideal way is to get weights and dimensions of the whole shipment from the supplier when you are negotiating rates etc with them. Manufacturers are used to giving these details out, and will have them on hand. If buying on an Ex Works basis the forwarder will also require the full pick up address of your supplier including post code & any special requirements such as 'pick up from 1st floor' etc.
When importing or exporting to or from overseas, it is important to choose a professional freight forwarder who can help you with making the right decisions, and help you understand the conditions of transit. They can also help you with any specific documentation requirements and customs clearance. Most importantly, they get your goods to market on time and cost effectively. Freight forwarders can handle all your logistical requirements and negotiate freight rates, arrange customs clearance, insurance & delivery to your door. It is also advisable to choose a forwarder who is a member of a reputable trade organization who you can refer to if something goes wrong. Door To Door Freight Services can provide you with the professional support and services you need to move your product to and from overseas markets & is a member of CBAFF (The Customs Brokers and Freight Forwarders Federation of New Zealand)
Selecting the right method(s), or combination of shipping methods, is vital to getting your goods to market on time and at the right place. Here are three common shipping options:
Ocean: Ideal for shipping larger or bulk items or goods that do not require fast delivery.
Air: Ideal for shipping smaller quantities which are required urgently.
Truck and Rail: Both of these land-based services are effective when used with ocean and air import.
You need to determine how quickly you need the goods to get here & whether it needs to be sent via air or sea. Generally speaking airfreight can take from 1-4 days, and sea freight can take several days to 6 weeks or more. This obviously has a bearing on the cost of shipment. For small amounts (up to 100kg, depending on volume) it is often cheaper to send via Air, as the minimum costs for sea freight often outweigh the total airfreight cost.
You also need to determine what transit time is needed. In most instances freight costs for a slower transit time or an indirect route are less than the quicker transit or direct route. For instance air freight ex Los Angeles to Auckland on Air New Zealand direct would usually be more expensive than Los Angeles to Auckland via Tahiti on Air Tahiti Nui. The same is true for sea freight. Hong Kong to Auckland on a direct sailing would generally be quicker and more expensive than Hong Kong to Auckland via Malaysia where the cargo would be discharged from the vessel from Hong Kong and loaded onto another vessel for shipment to Auckland.
If you don't need your goods to arrive as quickly as possible and can afford a few more days' transit, or the possibility of an off load with a transshipment service, then why pay for the more expensive service when a slower service would suffice?
Of course the opposite applies as well. It's all very well going for the cheaper route and slower transit to save money on freight, but if it absolutely has to be here by a particular date then there is an opportunity cost of missing a delivery deadline or holding up production. Your freight forwarder can advise you on method of shipment & transit times; at Door To Door Freight Services we always offer the best transit/cost combination for your needs.
NB: Please refer to point '8' of our Top Ten Tips regarding cheap sea freight rates offered by overseas suppliers.
It is highly recommended that you obtain insurance for your goods. Both parties involved in the export transaction must be fully aware of their responsibilities.
Exporters may often have an insurable interest long after the goods have left their possession, while the buyers could be ‘on risk’ before the goods are actually received.
The terms of cover are usually laid down in the sale contract or letter of credit. There are three internationally used insurance categories:
- Free of particular average (FPA) is the narrowest form of cover as the insurance company does not cover you for partial loss or damage to the cargo. You are only covered if the entire consignment is lost or damaged, for example sinking or fire. FPA cover is usually purchased to cover used goods, such as scrap metal.
- With average (WA) cover extends the FPA clause to include partial loss arising from heavy weather and seawater damage. Both FPA and WA can usually be extended to include protection from theft and pilferage.
- All risks (AR) cover is the most comprehensive cargo insurance, providing protection against loss or damage from external causes. The term 'all risks', is misleading, as it does not cover loss or damage arising from delay, inherent vice (deterioration or damage without outside help, e.g. milk souring). Losses as a result of inadequate packaging, weight loss from drying out, or market changes are also not covered. Risks from war, strikes, riots and civil unrest are also not covered, but can be covered at extra cost.
At Door To Door Freight Services we can quickly arrange insurance on your behalf at a competitive price.
Before importing your goods it is advisable to ascertain what duties & taxes are applicable upon importation & if there are any restrictions or prohibitions applicable to the goods you wish to import so that you are aware of all costs of getting your goods to your door. The goods may require special treatment or documentation at origin before they can be imported into New Zealand or they may be a prohibited import such as flick knives. Your Customs Broker/Freight Forwarder will be able to advise if any duty or levies are applicable & if there are any import restrictions or prohibitions applicable to the goods you wish to import.
Having confirmed the price & terms of trade from your supplier & costs of shipment to your door including insurance, duties & taxes, you can then arrange payment to your overseas supplier by one of the following methods:
Telegraphic Transfer or Telex Transfer, often abbreviated to TT, is an electronic means of transferring funds overseas. Funds are transferred into your suppliers account and they will then ship your goods. Whilst telegraphic transfer is the most common payment method used, it is the least secure for the importer as they are taking the risk that the supplier will in fact ship their goods once they receive payment.
CREDIT CARD PAYMENT
Credit card payments can be accepted if the exporter has a merchant agreement with an international credit card company. Many purchases relating to internet shopping, mail order or other forms of distance selling depend on customers providing a valid credit card number. You must also sign or otherwise confirm your wish to purchase. In most cases this will be with a company operating out of New Zealand and the transaction will be settled in New Zealand dollars. Purchasing at a distance by providing credit card details via fax/ telephone or email involves risk for both parties. Credit card details may be intercepted, which can lead to transactions which defraud the card holder. The technology is improving, but online credit card security remains an issue, despite fast growth in electronic trading.
LETTERS OF CREDIT
Letters of credit are a method of payment frequently used in international trade and has advantages and disadvantages. A letter of credit is in essence a promise made by an importer to an exporter to the effect that the exporter will be paid upon production of certain documents. This promise is normally transmitted through (and backed up by) a bank. Your bank will be able to set up & advise you regarding using a Letter of Credit to pay for your importation.
L/Cs provide the highest level of security, but are more expensive than other methods of payment and can cause delays.
SIGHT AND TERM DRAFTS
A simpler method of undertaking international transactions is ‘bank draft against documents’. This simply means the importer must instruct his bank to transfer funds to the exporter before the bank will let him have the documents. This provides some measure of security to the exporter, but not as much as an L/C. The importer has the option of simply refusing to accept the draft, in which case he cannot take possession of the goods, but neither does the exporter receive payment. In cases where the importer's business collapses, the exporter can be left exposed.
Drafts can also be drawn at sight, i.e. payment is made on the spot, or subject to terms. If a term is specified, the banks will recover interest in accordance with the terms of the draft.
This is the method used by most companies who have transactions with associated companies or where there are no issues of security, for example long standing trading relationships developed on the basis of mutual trust. This method, incidentally, is used for most domestic transactions in New Zealand.
Most companies will extend credit terms to their clients, subject to them meeting certain criteria. While this is the most efficient and less costly option, it also has the biggest level of risk. Many traders are prepared to accept those risks domestically, but are reluctant to do so internationally, where debt recovery can be more complicated.
Some exporters will simply demand payment in advance before they will ship the goods. This way, the importer assumes all the risks.
The selection of the method of payment is in essence a function of risk assessment. There are substantial penalties for seeking too much security (in the form of delays and charges) and equally substantial penalties for running an unacceptable level of risk.
Our advice is to look at these matters from a risk assessment perspective and then decide on the best method.
- Telegraphic transfers, drafts and open accounts are simpler and less expensive than L/Cs, but less secure.
- The selection of method of payment is a risk assessment decision.
Having paid for the goods, shipment can then be arranged. If you are buying on terms that do not include the overseas freight, you will need to arrange shipment of your consignment with your Freight Forwarder. In most instances this is a simple matter of providing your Freight Forwarder with the full contact details of your supplier including a contact name & phone number & a copy of the order, invoice or some other documentation evidencing the purchase. Your forwarder can then instruct their overseas representative in the country of export to arrange shipment of the goods. At the same time you will need to advise your supplier of the contact details of your Freight Forwarders representative in the country of export & authorize them to deliver or release the goods to that representative.
Once your consignment has been shipped certain documentation will be required to arrange Customs & MPI Clearance & delivery to your door this includes:
Commercial Invoice: This is the 'charge' document, containing details of the seller, buyer, goods, price & terms of trade.
Bill of Lading (B/L): This is issued by or for the shipping company (Ocean Bill of Lading), or the freight forwarder in the country of export (House Bill of Lading), and serves as a receipt for goods uplifted for shipment. It is also a contract of carriage and a legal document of title to the goods. On delivery of the goods the consignee is required to surrender a negotiable copy of the bill of lading to take possession. Certain exceptions do apply such as Express Bills of Lading or Waybills.
Airway Bill (AWB): The AWB is equivalent to a bill of lading for goods sent by air. In addition, courier companies often have their own documentation, unique to that transaction, which travels with the goods.
Certificate of Origin: The origin of goods has a direct bearing on the rate of Customs duty. Certificate of Origin may be incorporated in the commercial invoice, but a separate document, issued or countersigned by the Chamber of Commerce in the country of origin may be necessary.
Packing Slip: The packing slip includes the weight and measurement of each item on the commercial invoice but shows no value on it. These weights and measurements may be needed to complete Customs clearance.
NB: Minimum documentation required is the commercial invoice/s and a copy of the bill of lading or air waybill.
Once your goods have been shipped & export documentation has been received, preferably before the goods arrive in New Zealand, Customs & MPI clearance is required. All imported goods arriving in New Zealand are required by law to be cleared through the New Zealand Customs Service. Imported goods are subject to border security requirements, which include MPI & other Government authorities, and the payment of import duty and GST charges upon importation. Customs undertakes security screening and collects revenue charges on behalf of the New Zealand Government.
As an importer you need to have a Customs Client Code (Please refer to the Library section of our website www.doortodoor.co.nz for ‘NZ Customs-Client Code Application’) your Customs Broker can assist you with completion & lodgment of the form. Once you have obtained a Client Code you then give this to your Customs Broker, along with the relevant documentation as listed above, for them to complete your Customs/MPI clearance for you. If you are importing a container your premises must be approved by MPI who will then issue you an ATF (Approved Transitional Facility) number. (Please refer to the Library section of our website www.doortodoor.co.nz for 'MPI-Transitional or Containment Facility Application'). Door to Door Freight Services can arrange the unpacking of your container/s at an Approved Transitional Facility & delivery to your door if you prefer not to become an ATF.
Before final Customs release of the goods can be given any Customs Duties or Taxes that may be applicable must be paid. There are 3 different methods an Importer can use to make payment of their Duties/Taxes.
Client Deferred: The Deferred Payment Scheme (DPS) allows approved importers to defer the payment of customs charges (including GST) accounted for on Customs import entries for up to seven weeks and settle one month’s transactions with a single payment to Customs on the 20th of the month as per a standard trading account. A Deferred Payment account is advisable if you intend to be importing on a regular basis.
Broker Deferred: This facility means your duty/gst will go onto your Customs Brokers’ account and you will have to make payment to them, on receipt of invoice, to receive your goods.
Cash: For clients who are not on the deferred payment scheme or utilising a broker deferred credit facility, Customs charges must be paid in cash (which includes cheques, but not credit cards or EFTPOS) before their goods can be released.
When Customs duties & taxes have been accounted for & other border requirements met, final clearance is given & the goods can then be delivered to your door.
Upon completion of Customs/MPI clearance delivery can be arranged. Depending on your freight, a swing lift, hiab, tail lift truck, forklift or other unloading utility may be required. It is important to advise your freight forwarder of any special delivery requirements before delivery is arranged. At Door To Door Freight Services we can arrange delivery of your freight to your door utilizing any of the previously mentioned methods that may be required.
When your freight is delivered to you, it is important that you thoroughly check it for any damage, which may be due to inadequate packaging, rough weather conditions or other hazards involved in the transport of your goods. Any damage should be clearly noted on the delivery docket & a copy of the delivery docket kept for your records.
When receiving your cargo make sure you or your staff count the number of pieces and only sign for what you have received. Never assume that the carrier will let you know if there are any shortages at the time of delivery.
This can be difficult and time consuming when a large number of cartons are shipped as loose cartons but delivered on a shrink-wrapped pallet. You should remove the shrink wrap to get an accurate count and only sign for what you have received. Some drivers may advise you to sign for the goods with the notation, S.T.C (Subject To Count) and claim that you are covered if there are any shortages, but this is not true and does not give you the right to claim on your forwarder or his carrier if there was a shortage. Any shortages should be clearly noted on the delivery docket and a copy kept for your records. If you sign for the total number of cartons in the shipment and then find you are short you have no recourse on your forwarder or their carrier.
If your freight is damaged or there are shortages, you must notify your Freight Forwarder & insurance company straight away, your Freight Forwarder will lodge claims on appropriate parties & should assist you with the insurance claim. It is advisable to send through photos etc of the damage & to minimize any further damage if necessary. Do not dispose of the damaged goods or remove from packaging until advised to do so by your insurance company or freight forwarder.
In the unlikely event that your cargo is lost or damaged Door To Door Freight Services offer a full claims assistance service at no additional cost. That’s our step by step guide to importing, it does not cover all possible situations & intricacies of importing but is a basic guide to get started - good luck.