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5 Common Importing Mistakes – You should Avoid
Import and export business is highly profitable as well as risky.We say profitable because you have unlimited earning opportunity.In other side we also mentioned risky because if you don’t research all fees and charges,you may be in loosing side. We will discuss the five big mistakes that people first make when they start importing goods from China. Now, these are mistakes which our users experienced and shared with us. Recently they made mistake #3, and it cost them a lot of money in unexpected fees which massively ate into their profit margin. We will emphasize Chinese supplier and USA importer while explain the real facts.
Also read : Dubai export business and Top Products List
Mistake #1, assuming that shipping by sea will be the cheapest option.
Now this is a classic mistake that we see a lot of new sellers make. They assume that if they ship by sea, then they will get a leg up on their competition. And they often think they’ve cracked some super-secret code. The truth is unless you’re shipping in large quantities outside of China, it is usually cheaper to ship by air. Now, shipping by sea is, on the surface, cheaper than shipping by air. You see, if you ship by sea, it will normally cost you around 60 cents a kilogram.Whereas shipping by air carrier will normally cost you around $7 a kilogram.So that is a huge difference.Now you probably thinking, How can it even be cheaper to ship by air?” Well, the thing is that for you to be able to get it that low price, you need to be shipping by container, and the containers are very large. This means that you’re gonna be shipping hundreds of kilograms. And if you can’t fill a container by at least 60% to 70%, then, again, it will usually be cheaper to ship by air rather than by sea.
Now, let’s talk about shipping by air. When it comes to shipping by air, you have two options: 1. air freight and 2. air carrier. A lot of people hear this, and they get confused. Carrier is door-to-door shipment. So some carrier companies that you probably recognize are FedEx, UPS, and DHL. These companies have their own fleet of cargo planes which ship items all around the world. Cargo carriers will pick up your items from your supplier, and then drop them off at your location of choice. For example this is gonna be an Amazon warehouse.
On the other hand, air freight is when you simply have your cargo flown from one airport to the other. You see, airlines like Air China don’t just carry cargo for their passengers. They also carry commercial cargo as well. And sometimes, this can be almost half the price of having your items taken by cargo. But like with all things in life, there is a catch. You still need to pay someone to pick up your cargo from your Chinese supplier and then drop it off at the airport.
You will need to source an independent customs broker to handle the documentation at the border. And you will also need to organize freight forwarding so that your cargo can be picked up from the port and dropped off at your location of choice. There are often hidden fees in this that you don’t account for on your very first time.Therefore, if you’re importing for the first time, and you’re doing this, you need to allow a buffer. Now this all sounds, probably, a bit expensive, and yes, it can be, but it gets a lot better in larger quantities. The reason is that when it comes to air freight and forwarding companies, there are a lot more fixed fees. And obviously, these fees scale as you ship larger quantities.
Ultimately, if your shipping is something that is 50 kgs or less, it is most certainly cheaper to ship by carrier rather than by freight. And believe it or not, depending on the item that you are shipping, it may still be cheaper or comparable to use carrier rather than freight. The most important thing to do to avoid this mistake is to do your research ahead of time. There is a website called Freightos that lets you compare freight rates from different companies.
Mistake #2, not using the metric system when working with Chinese suppliers.
In China, they use the metric system as well, and not the imperial system. So when you’re working with your supplier, be sure to use kgs instead of pounds, and be sure to use centimeters instead of inches. And this is just a general note to anyone who want to work with Chinese suppliers. When you’re working with a Chinese supplier, you need to be aware that they expect you to work on their terms, and not on your terms. This means working on their time frames and their schedules. As a foreigner, it is not culturally acceptable for you to be late to a meeting. But it is culturally acceptable for them to be late to a meeting. Now, is this fair? No, but you’re getting your items ridiculously cheap, so truthfully, We wouldn’t really complain too much. Make things easy. Work with them, rather than against them.
Mistake #3, using Less than Container Load as your shipping option.
Now, unfortunately, this can be a very costly mistake to make. And as we said at the start of this post, we have a user that made this mistake and again, it cost him a lot of money. So remember, we were telling you that if you ship by sea, then you need to ship using an entire container.This is called FCL, which stands for Full Container Load. The truth is that this isn’t the only option. You can also ship by renting basically a portion of a container. And this is called LCL, which stands for Less Container Load. You and other importers rent a portion of a container so that collectively, it makes it worthwhile to ship by sea.
Our user discovered this and he thought, “Yes! This is great! This is my solution. We can still ship by sea, with a small shipment, and have rock-bottom prices. It is fantastic plan.He was gonna ship half of his cargo by air, so that it would arrive in the Amazon warehouse as quickly so that he could start selling very fast. And then he’d ship the rest of his cargo by sea, using LCL, so that he’d save lots of money and make even more profit. A perfect plan, right? but the reality comes different. Half quantity which was sent by sea has accrued these huge charges at the port that he didn’t expect. hundreds of dollars charged and they completely destroyed his profit margins. The thing about these companies that offer LCL shipping is that they usually don’t make their money in the shipping process. Instead, they make their money at the port. This is because you have to pay huge fees at the port as a result of shipping with them.
The reason for this is again, these companies don’t make their money during the shipping process. Instead, they make it at the port in the forms of commissions and kickbacks for the additional fees that you, the importer, have to pay there. It’s a super dirty thing to do, and it preys upon new importers. You see, every port has its own destination service charges. In the United States, these usually are about $500 to $1000 per container. So you would assume that because you’re only renting a portion of the container, that you would be paying fees relative to the portion that you were using, right? Well, that is not the case.
When you ship by LCL, you usually get slammed with a huge fee.Instead of being based upon the container size,it is based upon your share of the container in cubic meters. Essentially, you end up paying hundreds of dollars at the port in charges. And these can often be comparable to if you had shipped an entire container yourself.The company makes its money through commissions and kickbacks which are called rebates. If you had instead shipped by air, well, you would have saved a lot more money and your inventory would have gone there a lot faster than if you had shipped by LCL. It’s a slimy business. Do not fall for it. Do not fall for something that is too good to be true.
Read : Top 10 Amazing Shipping Container House Plans
Mistake #4, not checking what duties you have to pay.
First of all, we want you to not worry. There is a simple solution to a seemingly complicated problem. And it’s worthwhile doing so that you don’t get slapped with an unexpected bill. This was a another mistake by a anonymous user , he shared with us.They didn’t calculate what their duties would be. So when they got their bill, it was a bit of a sticker shock. In their case, they had not set aside the correct amount of money.They had to scramble to get it together so that the inventory could be cleared at the border. Now, duties can be a bit complicated. For example, let’s say that you are importing woolen jackets into the USA. Well, there isn’t just one tax supplied to all woolen jackets. There are other factors to consider when working out what your duty rate would be.
Different duty rate
For example,the wool used for the jackets imported from Israel? Well, if so, Israel has a duty-free agreement with the USA in relation to wool. So if the wool used for your jackets came from Israel, then your duty rate will be cheaper. And here is another question. Do your woolen jackets contain synthetic fibers or are they pure wool? If they contain synthetic fibers, then your duty rate would be higher, because of the fact that in the USA, there are higher duties applied to products made with synthetic fibers due to the additives used during the creation of synthetic fibers. But you know, as the importer, it’s unlikely that you are going to know the answers to all of these questions.
HTS code
But luckily you don’t need to because chances are, your supplier does. All items imported to the USA have what is called an HTS code slapped on them. And this HTS code has a duty rate applied to it. These codes account for all of the weird quirks like what types of fabrics were used. HTS stands for Harmonized Tax System. This is a huge manual containing over 17,000 codes. People spend their whole lives studying this. They get PhDs in this. Luckily, you don’t need to. You just need to know what the HTS code is for the item that you’re importing.Most Chinese suppliers will be to give it to you. When they do, just do a search for it, and figure out what your duty rate is. Now, interesting fact, the system for classifying items is actually universal. So the chances are that even if you’re not importing items into the USA, that your local country of residence has something similar as well. See, we told you that there is a simple solution to a seemingly complicated problem.
Mistake #5, Being afraid to import because you’re scared of making mistakes.
We understand that it’s easy to read this post and be afraid and put off from importing. Because of the fact that you’re afraid of making mistakes like the people we have mentioned as well and also losing money. Because after all, if you screw up, that is going to cost you money and nobody wants to lose any money. Let us be honest with you. Even if you follow a step-by-step system, there is a reasonable chance that you may still lose money from some unexpected fee that you didn’t realize.And well, honestly, this is just life.
Unfortunately, like our previous user experience from mistake #3, this could massively eat your profit margins. Well, here is the thing, they made that mistake, but now they know. He has learned from his mistake. Next time, he will use air freight for all of his cargo, saving a lot of money and greatly increasing his profit margins. Sure, he lost some money the first time, but since he’s done it once, he knows what to expect now, and how to avoid those same mistakes. Of course, next time, he’ll go on to make a lot of money. If he hadn’t gone out there and tried, he’d be stuck in the same place, doing the same old job, making no progress. The only way to guarantee failure is honestly, to not try at all. But instead for him, he went out there, gave it a shot, know it wasn’t perfect, but the next time, he sends stuff up to massively succeed.
Mistakes are a part of entrepreneurship. Sure, learn from other people’s mistakes and don’t make the same ones, but don’t be afraid to make you own.