A reoccurring comment we hear from LCL importers is “Why is it that our charges are so inconsistent?”. On investigation, we find that it all comes back to the agreed incoterms of sale. Generally finding that it is that the importer is buying on CIF terms.
CIF is “Cost Insurance Freight”, the buyer is paying the seller for the cost of the goods, transit insurance and Freight to the port of entry at the destination country. This for importers seems like the “easiest” option.
However, what this can create is limit control on timing, create additional work for the buyer to stay on top of shipping details to plan for the goods on arrival and local charges being charged according to whichever consolidation handling office the suppliers consolidator uses.
Does that mean you should not buy CIF? No, this is still a good option for many importers. To solve the common issues with control and inconsistent charges, communicate with your supplier and your freight agent. Make your expectation clear and ask that your supplier(s) and your freight agent work together to ensure that your expectations on timing and costs are still being met.
3 easy tips that may assist:
- When accepting a CIF quote from the overseas seller, issue them with a Purchase Order that outlines expectations on arrival time into Australia
- Provide a copy of the quote, purchase order and specific details of the seller to your freight agent. Ask them to communicate with the seller to determine the consolidator details and associated arrival charges when arriving in Australia. Your freight agent can advise the seller what are the acceptable arrival charges so this can be negotiated when the seller is booking with the consolidator at the origin.
- Establish a landed costing model with your freight agent. A landed cost is establishing what your goods are worth when they arrive at your door in Australia prior to being sold into the market. This will give you a value window of acceptable costs to pay on import rather than specific costs.
The key to limiting inconsistencies is EXPECTATION AND COMMUNICATION!