New Importer on Freight Terms and Shipping Concerns

July 9, 2014 | By | Reply More

international trade

QUESTION ON New Importer on Freight Terms and Shipping Concerns

I am just getting into importing goods from Asia. a supplier quoted me for some goods and the quote was:

FOB Price
Product A 2.95
Product b 4.25

What does this mean please — FOB? Also, I have not quoted my interested buyers here in Canada. They want to know what price will they be getting products for, but I don’t know how to quote them yet, since I don’t know how much the shipping / customs etc charges are. Is there like a typical formula that one can use to know how much the shipping / customs costs, will increase the above price for each quote.

Question B: The company that makes stuff for me in Asia wanted to see some sample of styles that i wanted copied. I send my sample from Toronto, Canada, and it cost me like 260.00 Canadian dollars by FedEx for just 5 lbs by weight of the product. is there any other cheaper way of sending samples via airmail, besides FedEx?

– Azhar


Dear Azhar,

Thank you for your question.

FOB Price as in $2.95 FOB Port of Loading means that the shipper will deliver the goods to the ship or to the carrier. You will pay for the freight + Insurance of the goods until it arrives to the Port of Destination. This is usually charged to you by the carrier before you can claim the documents of your shipment. FOB is short for Free On Board.

Additional costs that you might incur will be customs duties (if any), Brokerage and other costs of transporting the goods from the pier to your warehouse.

All these when summed up will be your total cost of delivery. Add these to the cost of your goods and you have your total cost. You may also include the cost of communications, i.e. phone calls, fax, the FedEx samples, etc. to be more precise.

With all these summed up, you may calculate the margin of profit you intend to make. In our experience, importers usually sell their merchandise on wholesale prices based on 100% of the cost. Retail prices usually are calculated 250 – 300 %. The prices however are governed by the market conditions. If the product has many competition, or similar items already in your market, then you will have to reduce the prices to allow you to compete.

There is no specific formula because the operation involves simple arithmetic. If your shipping costs becomes so high (as in using Fedex or shipping by Airfreight) your costs might make you noncompetitive. In our case, we usually use the Postal Service Global Priority Mail for US. If you have a similar service to Canada, ask your supplier to check it out at their Post Office. You may also check it out at your end so that you can send your samples to be copied via the postal service to save on freight costs. The delivery time maybe a little longer but it is definitely cheaper.

Additionally, if you are importing your goods in small quantities, try to contact a forwarding company who may have agents in the country where you are importing. Many forwarders also act as consolidators, i.e., they gather small shipments from different shippers and consolidate them into one 20 feet or 40 feet containers. Then they ship the containers by SEA freight. Costs are far cheaper than using AIR freight. Although the shipping time may take longer because there might not be enough cargo to consolidate and shipped to your destination. Shipping time normally goes to about 30 to 90 days, however, you may program delivery to your customers using that time frame. If this is not possible, the Postal Service is our best alternative.

Hope this helps.

Nach M Maravilla
Recommended Resources on Import/Export

Article originally published in January 2004. Updated February 20, 2012

Nach Maravilla is the President and CEO of LLC. He has over thirty years experience in sales and marketing of various products, which covered as he jokingly describes, “from toothpicks to airplanes” He also had extensive experience in International trading and he always excelled in special promotional ideas for retail outlets.

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New Importer on Freight Terms and Shipping Concerns
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New Importer on Freight Terms and Shipping Concerns
A reader is about to start importing goods from Asia, and has a number of questions on freight terms and cost of shipping.
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