Suggestion: Watch the 10 minutes video tutorial before reading this article
Trying to estimate shipping costs when importing products from China? In this guide, you’ll find a complete overview of the various freight costs, common pitfalls and how to ensure that you get quoted the right freight cost from your forwarder or supplier.
Shipping Cost Overview
- Factory to Port Transportation
- China Export Clearance
- Freight Cost
- Document Delivery (DHL or FedEx)
- Port Charges (Port of Destination)
- Customs Bond (United States)
- Domestic Transportation (Port of Destination to Final Address)
- Shipping quotation sample
- How to understand a freight quotation
- How to reduce your shipping costs from China
- The cheapest ways to ship from China
Factory to Port Transportation
When production is completed, and the batch is approved by the buyer, the supplier shall arrange for transportation from its warehouse to the nearest Port of Loading.
The shipping cost for transporting an FCL 20’’ container range between a few hundred, up to around RMB 3,000 (Around $480), depending on the distance. As most export-oriented manufacturers are still based around the coast, and thanks to China’s infrastructure, a port is rarely more than a three to four-hour drive away.
That said, local transportation is included in the FOB price. If you, like most importers, purchase according to FOB terms, the cost is already included in the price paid to the supplier.
Factory to port: $50 to $480 (Included in FOB)
China Export Clearance
Before your cargo can be loaded and shipped, the goods must be cleared for exports. I can’t say that I know the exact details of this process, as such paperwork is always handled by the supplier or the export agent.
I am, however, aware of the issues that may arise if such documents are not produced.
The Chinese Customs Authorities, the ‘Hai Guan’, tend to make routine checks on roughly 10% of the outbound shipments (probably more for inbound). If a supplier is found, trying to export products without the proper documentation, the customs authorities may issue a fine counted in the thousands of RMB.
All export clearance documents and procedures are included in the FOB price. Importers are wise to avoid hassle and simply stick to FOB transactions.
Yet, many buyers still believe they can save a few dollars by ordering according to Ex Works (EXW) terms, which neither includes inland transportation, nor export clearance documentation.
Buyers that for some reason still insist on buying according to EXW terms may purchase the export clearance documents from a licensed freight forwarder, or export agent – at a cost ranging between US$100 to US$200.
In general, it’s more time and cost-efficient to let the supplier handle this part.
China Export Clearance: $100 to $300 (Included in FOB)
With ‘Freight Cost’, I’m referring to the cost of shipment from the Port of Loading to the Port of Destination, in the buyer’s country.
This is the most complex part, as it’s always balanced towards the local charges, paid in the Port of Destination. Basically, there are two ways to pay a freight forwarder:
- High freight cost, low local charges
- Low freight cost, high local charges
When shipping Full Container Loads (FCL), the price is, at least based on my experience, almost exclusively set according to the first option.
The price for an FCL shipment, obviously depends on the destination, both in terms of distance and cargo volumes. Below follows a few FCL 20’’ price samples for various destinations in the US, EU, Australia, and Asia:
- Shenzhen – Los Angeles: $2,230 – $2,460
- Shenzhen – New York: $2,275 – $2,515
- Shenzhen – Felixstowe (UK): $1,435 – $1,585
- Shenzhen – Hamburg: $1,440 – $1,590
- Shenzhen – Sydney: $685 – $760
- Shenzhen – Singapore: $270 – $295
- Shenzhen – Dubai: $1,445 – $1,595
Less than Container Load (LCL) shipping is a completely different story. LCL rates are often set at rock bottom prices – sometimes as low as US$30 to US$40 per cubic meter.
What the forwarder is not telling you about is the local charges, which combined can cost three to five times as much as the ‘freight cost’. In the industry, this is called a ‘kickback rate’, and is very common.
Low freight cost, but very high local charges. Yet, importers fall for this trick time and time again.
Essentially, forwarders are driven to apply these practices, as many small businesses importing from China are quick to reject a proper freight quotation, as it’s far more pricey than a quote based on a kickback rate.
Nowadays there are tools, like this one, that allows you to compare costs from different freight forwarders with a few clicks.
Freight Cost: Depends on location, volume, weight, and destination
I cannot find a single good reason to not buy an insurance. Many suppliers use cheap and substandard export packaging, and few buyers bother to set any specific quality requirements – or even check the packing prior to shipment.
Without insurance, no compensation is paid by the forwarder, in case the cargo is damaged during transportation.
Most forwarders use PingAn to insure cargo, which charges 0.02%, based on 110% of the FOB price. Assuming you buy goods worth US$50,000, the insurance will only set you back a mere US$110.
That’s a fair deal if you ask me. Based on my experience, compensation claims are fairly simple to make, and the insurance company is usually satisfied with photos and a protocol listing the quantity and value of the damaged goods.
Insurance: 0.2% x 1.1 x Cargo Value (Included in CIF)
Document Delivery (DHL or FedEx)
The buyer is expected to pay for any ‘additional shipping costs’ arising, including the delivery of the Bill of Lading, Commercial Invoice, Packing List and other documents required, such as a Form A or Country of Origin Certificate.
A FedEx or DHL delivery of the mentioned documents will set you back another US$40 to US$50.
Document Delivery (DHL): $40 to $50
Port Charges (Port of Destination)
The local charges often come as an extremely unpleasant surprise to first-time importers. As previously mentioned, the practice of kickback rates among freight forwarders enables suppliers to offer to ship at extremely low prices, while the real profits are made upon arrival in the Port of Destination.
When shipping FCL, the local charges are set per container, rather than per cubic meters. I don’t have price data for each and every port, but the charges tend to range between US$500 to US$1000 per container.
However, that’s only for FCL. When shipping LCL, the local charges are calculated based on the volume, set in cubic meters. The price increase logarithmically, to the point where an LCL shipment of 15 to 17 cubic meters is just as costly as an FCL 20’’ shipment, the latter offering a total volume of 29 cubic meters.
Port Charges: $100 to $450 (Included in DAP and DDU)
Customs Bond (United States)
US companies importing from China, or anywhere else for that matter, must obtain a customs bond before arrival in the Port of Destination.
Kathy Rinetti, Customs Manager of Flexport.com, explained the basics in an interview we published in October 2014:
“Also, prior to importing, importers will need to have a Customs bond on file prior to their shipment’s departure if their goods are valued over $2,500. If the value is less than that, then they can import under an informal entry and without a Customs bond, but this process would require them to manually submit paperwork. They can also import under a formal entry (with a Customs bond) even if their shipment value is less than $2,500.
You can obtain a Customs bond through most Customs brokerages, which typically have the ability to purchase bonds on your behalf through surety companies. There are two types – single entry and continuous entry Customs bonds. Single entry bonds are for one-time use and continuous entry bonds cover all your shipments over the course of a year.”
A single entry Customs bond can be purchased for around US$100 – US$200, while a continuous entry customs bond costs US$250 – US$450. The latter makes sense for importers importing multiple shipments on a yearly basis.
Customs Bond: $100 to $200 (Single Entry)
Domestic Transportation (Port of Destination to Final Address)
Last, is the transportation from the Port of Destination, to your warehouse. The final delivery can be made by truck, rail or a combination of the two. The price depends entirely on your proximity to the warehouse, and on the country, so I cannot offer any price estimation.
Shipping Cost Overview
|Local Transportation||$50 – $480||Included in FOB|
|China Export Clearance||$100 – $300||Included in FOB|
1. Depends on location, volume (LCL / FCL) and local charges
2. Beware of kickback rates when shipping LCL
|Insurance||n/a||Insurance cost = 0.2% x 110% of the cargo value|
|Document Delivery||$40 – $50|
|Customs Bond / Clearance (US Only)||n/a|
1. Single entry: $100 – $200
2. Continuous: $250 – $450
|Local Charges||$100 – $450|
1. Depends on location, volume (LCL / FCL) and the freight cost
2. Beware of kickback rates when shipping LCL
|Domestic Transportation||n/a||Depends on proximity to the port|
Shipping Quotation Sample
Freight quotations tend to be cryptic and almost impossible to decipher for someone without experience in the logistics industry. Rather than simply stating a total cost, many freight forwarders offer something that looks like this:
- CFS Charges: $69.30
- Origin Documentation Fee: $30.00
- ENS Fee Exempt: $30.00
- Re-weighting and VGM Sending-Fee – LCL: $15.00
- Export Customs Clearance Fee: $23.00
- Freight: $277.20
- Cargo Insurance: $ 63.15
- Destination – Other Charges: $590.62
This quotation is actually fairly easy to understand, as each item has a fixed cost. Also, notice that the freight cost ($277.20) is only one of many charges to take into consideration.
That said, it’s also a common practice among forwarders to only quote shipping costs on a per cbm basis:
These quotations are very hard to interpret for the uninitiated, as it requires a complete understanding of the methods your forwarder use to calculate the shipping cost – something they are rarely willing to share.
My recommendation is that you always request a total DAP or DDU price, based on the following:
- Weight and volume
- Port of loading
- Port of destination
- Final delivery address
Although the cargo volume and weight can change, it’ll still give you a reference point and make it harder for your supplier or forwarder to come up with new unexpected charges.
Questions & Answers
How can I reduce shipping costs from China?
Here are a few examples that can help you cut your shipping costs:
1. Consolidate your LCL shipments into one single FCL container
2. Adjust your order volumes based on container capacity (e.g. 20” FCL = 1200 pcs)
3. Book ocean freight instead of air freight
4. Book DAP or DDU shipping instead of CIF
5. Optimize the export carton and product packaging dimensions to reduce the total cargo volume
Here are a few things you should not do:
1. Book CIF instead of DAP or DDU shipping
2. Not buy insurance
3. Ship product packaging or other materials in separate containers
4. Book last minute air freight
How do I calculate shipping costs?
You can either use a freight calculator or request a quotation from your freight forwarder.
How much does it cost to ship a package from China?
Shipping individual parcels, or even a few documents, is relatively expensive. DHL and FedEx charge around $30 for a 500 grams parcel from China. That said, you can reduce the costs if you use a Hong Kong-based fulfillment center to deliver products to your customers around the world.
How often to freight costs change?
Shipping costs can change on a daily or weekly basis. Hence, shipping quotes expire quickly, due to the volatile nature of the international freight market.
What do I need to get a shipping quotation?
Freight forwarders require the following information before they can provide a quotation.
- Total cargo volume (cbm)
- Total weight (kgs)
- Port of loading
- Port of destination
- Insurance (Yes / No)
- Supplier incoterm (i.e., FCA or FOB)
- Delivery incoterm (i.e., DAT or DAP)
As such, the final freight cost can only be ‘confirmed’ once the products are manufactured and packed. That said, you can still get an estimate.
What is the cheapest way to ship from China?
FCL container sea freight is by far the cheapest way to ship products from China. The more you ship, the less you pay, meaning that importers buying large volumes from their suppliers enjoy far better freight rates than their smaller competitors – who are often stuck in limbo between LCL shipping and air freight.
Cost (Low to high)
1. FCL sea freight
2. LCL sea freight
3. Railway freight (China to EU)
4. Economy air freight
5. Express air freight
How can I find the cheapest freight rates?
Keep in mind that freight costs are set according to the market price. Freight forwarders rely on very slim profit margins, so there is little room for price negotiation.
Hence, you should not expect one forwarder to quote a price that is much lower than any other company.
As a matter of fact, you should watch out for “forwarders” that claim to offer freight rates below the current market price, as they may be scammers. If it looks too good to be true, it probably is.
Can I save money if I book shipping via my supplier?
Virtually all manufacturers already work with one or two local freight forwarders. As such, suppliers can, if requested, book and manage the shipment. That said, this does not result in any cost savings, as shipping costs are international.
The opposite is often true, as Chinese suppliers tend to offer CIF quotations, which doesn’t account for local charges in the port of destination. As mentioned, these are often higher than the freight cost itself.
You are in almost every case better off booking shipment via a platform like Freightos.com.
Do some suppliers offer free shipping?
Yes, in the sense that the shipping cost is already included in the product price. However, you will always pay for shipping, one way or the other.
Further, this is only applicable to Aliexpress.com, DHgate.com and similar online wholesale platforms.
When you order from ‘proper’ manufacturers, free shipping is non-existent.
Does Alibaba have free shipping?
Individual suppliers part of the Alibaba wholesaler program can offer free shipping. This means that the shipping is included in the unit price, meaning that shipping is not actually free – only that it’s not specified as a separate cost.
Which is the best Incoterm if I want to keep track of costs?
DAP (Delivered at Place) includes export clearance, freight and local charges (in the port of destination). Hence, I’d say that this is the best incoterm, as it is ‘all-inclusive’ in terms of shipping costs.
That said, many manufacturers in China tend to not offer DAP quotations, as it involves more work. In addition, I would not count on their local forwarders to handle all the bookings required.
Instead, I advise you to buy according to FOB terms from your supplier and then order DAP shipping from your freight forwarder. That way you can control the process in China while confirming all the costs before the goods arrive.
Should I avoid CIF freight?
CIF (Cost Insurance and Freight) doesn’t include the local port charges, at the point of entry in the buyer’s country. The port charges (or, local charges) are often counted in the hundreds of dollars – especially when shipping LCL.
In fact, the local charges often exceed the shipping cost itself.
The problem, when shipping according to CIF terms, is that you don’t get the local charges billed until the goods have arrived in the port of destination.
At which point it is too late to find other options, or negotiate the price.
How do I estimate air freight costs?
Unlike sea freight costs, which are in most cases only based on the volume, air freight charges are based on either the volume or the weight.
In air freight, the volumetric weight applies, if it exceeds the actual weight.
Do you need help with shipping and customs?
We know how hard it is to understand the shipping and customs process, especially if you have never imported from Asia before. To help startups get a grip on the process, and avoid scams and overcharging shipping agents – we created the Starter Package:
a. Tutorials, Video Walkthroughs and Task Lists that guide you step-by-step through the entire shipping and customs process
b. Import duties, taxes and calculation examples for the US, Europe, Australia & more
c. Licenses, permits and how to obtain the required documents for the US, Europe, Australia & more
In addition, you can also book quality inspections, lab testing, and shipping directly from the platform. Click here to learn more.