Searates' Asia Shipping Guide: A must read for importers and exporters

Jul 22, 2020 Lilia Khovrak Lilia Khovrak

INTRODUCTION

The Asian region presents importers and exporters with some incredible opportunities. The region’s ability to produce cost-effective goods with relatively short lead times is only one of its competitive advantages. At the same time, key markets such as India and China continue to demonstrate the increasing demand for international goods providing a great opportunity exports into the region.

There is however risk associated with trading with Asia and it is important to be aware of the various regulations and conditions in place. This will serve to avoid costly delays and will ensure a smooth experience for shippers and their clients. 

This guide will provide details on managing shipments between Asia with an emphasis on shipping to and from the US and Spain. The guide will cover the following aspects:

·      Transit time to and from Asia

·      Major ports in China, Vietnam, and India

·      Incoterms -  widely-used terms of sale

·      Shipping documents

·      Customs fees

·      Covid-19 & ocean freight shipments

 



TRANSIT TIMES TO AND FROM ASIA

When planning an ocean freight shipment, it is essential to consider the transit times involved when shipping to and from Asia. The times listed below are the average transit times to countries in Southeast Asia and the Far East, such as China, India, and Vietnam.

From Spain: 33 days

From the US West Coast: 34 days

From the US East Coast: 52 days

Please note that these times are average estimations, but actual shipping times may vary, depending on the number of transits, the ports, shipping lines, and whether the shipment is an import or export.


TRANSIT TIME FROM SPAIN TO ASIA




TRANSIT TIME FROM THE US TO ASIA




TRANSIT TIME FROM ASIA TO SPAIN




TRANSIT TIME FROM ASIA TO THE US




MAJOR PORTS IN CHINA, INDIA, AND VIETNAM

While it may seem logical to transport goods to the port closest to the shipment’s final destination, it may not always be the best option due to logistical or financial considerations. It is therefore important to identify which ports offer the most favorable conditions.

Here are some of the major ports in China, Vietnam, and India.


MAJOR PORTS IN CHINA




1. Port of Shanghai

The Port of Shanghai overtook Singapore as the world’s largest in 2010, a position it still holds today and in 2019 crossed the 40 million TEU mark.

Shanghai is also home to the world's largest automated container terminal.


2. Port of Shenzhen 

The Port of Shenzhen consists of a number of ports along the coastline of Shenzhen, Guangdong Province of China.

Approximately 560 ships call in each month, covering more than 130 international container routes and over 20 feeder routes to other ports.


3. Port of Ningbo-Zhoushan

In 2012 the Port of Ningbo-Zhoushan became the world’s busiest in terms of cargo tonnage and exceeds 100 million tons per year.

The port deals mainly with goods from North and South America and Oceania, connecting with more than 560 ports from all over the world.


MAJOR PORTS IN INDIA




1. Jawaharlal Nehru Port

The Jawaharlal Nehru port was founded in 1989 and is India’s largest, handling over 55% of the country’s container cargo.


2. Port of Chennai

The port of Chennai was founded in 1881 and is the second-largest container port in India, serving as a direct connection to over 50 ports around the world.


MAJOR PORTS IN VIETNAM




1. Da Nang Port

Da Nang Port has experienced tremendous growth. In 2017 it showed 10.79% year on year growth, handling approximately 7.4 million tons that year.


2. Hai Phong Port

Hai Phong Port is one of the region’s oldest, established in 1874 and it serves as a gateway for Northern Vietnam. Once current development work is complete the port will handle a ship of between 30 – 40 thousand DWT.  


RECOMMENDED INCOTERMS FOR EXPORTS TO ASIA

Incoterms are trade terms established by the International Chamber of Commerce (ICC) that determine the responsibilities of the importer and exporter during cross-border trade.

The latest edition of Incoterms (Incoterms 2020) has established 11 incoterms, all with different benefits and obligations. Below SeaRates details its recommendations for the incoterms best suited for the Asian market.


CPT Incoterm (Carriage Paid To)

CPT incoterm stipulates that the supplier can consider delivery complete when export customs procedures are complete, the goods are transferred to the forwarder for transportation to a designated destination. Once this step is complete all risks associated with goods transportation fall to the recipient. CPT is concluded on the basis of an international contract of sale, which indicates all the responsibilities and expenses borne by each party. Under CPT conditions, the recipient must insure the goods.

You may find more information about CPT here.


CIP Incoterm (Carriage and Insurance Paid to)

CIP incoterm provides that a supplier may consider delivery complete the following actions have taken place – customs procedures, insurance policy is paid and goods are transferred to the forwarder for transportation to a designated location.  At this point, all risks associated with the transportation of goods pass from the supplier to the recipient.  The insured sum must be 110% of the value of the agreement and a stipulated currency. CIP is concluded on the basis of an international contract of sale, which indicates all the responsibilities and expenses borne by each party. 

You may find more information about CIP here.


DDP Incoterm (Delivered Duty Paid)

According to the DDP incoterm, a supplier may consider delivery complete when the following steps have occurred – goods delivered to the recipient, import duties paid and cargo is ready for unloading at the specified destination. DDP imposes maximum obligations on the shipper, as opposed to the EXW clause, where shipping responsibilities are placed mainly on the recipient. The recipient may decide to unload or insure the goods at their own time. 

You may find more information about DDP here.


DAP Incoterm (Delivered at Place)

The DAP incoterm places most obligations on the supplier. The supplier is required to pay all export duties, delivery costs, ensure goods are packaged and transported, provide the necessary documentation, and to deliver the goods to the recipient.  The recipient unloads the goods and will determine whether or not they will insure the goods.

You may find more information about DAP here.


RECOMMENDED INCOTERMS FOR IMPORTS FROM ASIA

It is important to know which Incoterms provide the most favorable conditions for importers and exporters and this can be challenging to discern. As a result, SeaRates recommends the following incoterms for the Asian region.


FCA Incoterm (Free Carrier)

Almost 40% of all agreements are drafted using the FCA incoterm, mainly due to its ease of use and universality. There are 2 points of dispatch:

1. A goods dispatch point belonging to the seller – such as a warehouse or retail location. Delivery is considered complete when goods are loaded on the buyer's vehicle or transferred to the courier.

2. A goods dispatch point not belonging to the seller – such as an airport or seaport. Delivery is considered complete when the goods are transferred to the carrier (who is not responsible for unloading).

If the buyer instructed to give the seller a package of documents (for example, a bill of lading marked “on board” or an air waybill) then the carrier must provide all original consignment notes to the seller.

You may find more information about FCA here.


EXW Incoterm (Ex Works)

EXW incoterm states that the recipient takes the goods from the supplier’s premises (such as a warehouse). The supplier does not bear any obligations, except for the shipment of goods. All costs are borne by the recipient. EXW is not used for shipments to the EU or if a recipient is unable to export independently.

You may find more information about EXW here.


IMPLICATIONS OF IMPORTING FROM CHINA UNDER CIP

CIP has become a very popular incoterm for those undertaking initial imports from China as it states that importers only take control of the cargo at the destination, seemingly placing very little onus on the importer.

But there is a hidden condition to the incoterm which has unfortunately resulted in delays and heavy costs for importers. The condition is that, prior to handover, destination agents may request payment of destination fees by the importer. There are many instances where unscrupulous agents take this opportunity to inflate their fees and may refuse to hand over the cargo until payment is made. They are legally allowed to do this as they are listed in the bill of lading as the cargo consignee.

As a result of this risk, SeaRates recommends that CIP should only be used in instances when dealing with a trusted agent, list the recipient as consignee, or use FCA incoterm.


OCEAN FREIGHT DOCUMENTS

While ocean freight shipment may seem relatively straightforward, this is most often not the case. Ocean freight is often regarded as synonymous with documentation due to the participation of a variety of different stakeholders, each with specific and varied documentation requirements.

In this section, we cover the most important shipping documents needed for ocean freight to and from Asia.


STANDARD OCEAN FREIGHT DOCUMENTS

There are certain documents that are required no matter where shipments are sent. These include the Bill of Lading, Power of Attorney (POA), packing list, and commercial invoice.


Bill of Lading

The Bill of Lading is the most important document for ocean freight shipping as it covers goods from the point of departure to the final destination, is used when an exchange or transfer from one carrier to another, and is necessary to complete the trip.

Given the importance of this document, it cannot be overstated how essential it is to check the contents of the Bill of Lading. Even minor errors can cause lengthy delays and even hefty fines. SeaRates recommends reading our in-depth guide on the Bill of Lading to understand the different types and how to fill them out correctly.


Power of Attorney (POA)

Power of Attorney is a document that authorises a customs broker to handle customs proceedings such as payments and forms on another’s behalf.

A freight forwarder will provide this document, which will have to completed and returned together with a copy of the shipper’s identification.

Note: The POA must be signed by an authorised representative of the company.


Packing List

The packing lists provide a list of items contained in one shipment and is essential if one package contains an assortment of goods. It is absolutely vital to ensure the accuracy of the packing list as it may be used to generate the Bill of Lading.


Commercial Invoice

The commercial invoice provides the bearer with the ability to claim payment for goods supplied under conditions agreed between seller and buyer.


COUNTRY-SPECIFIC DOCUMENTS

There is additional documentation that may be required, depending on factors such as country and product type, amongst others. This section briefly covers some of the specific import documentation required when shipping to Spain, the US,  China, and India.


United States

Importer Security Filing (ISF)

Also known as a “10+2”, the ISF is required by the US Customs Border and Protection (CBP) for all goods entering the US. The cargo owner is responsible for submitting this document and must do so at least 24 hours before cargo arrival or face a $5,000 fine.


Spain

Forms 036 and 037 and EORI

A registered business person importing into Spain is required to submit tax register declaration forms known as forms 036 and 037. An EORI (Economic Operator Registration and Identification) number – that represents an entity in all customs proceedings – is also required. This number can be obtained by apply on the Spanish tax authority website.


China

China Compulsory Certification (CCC)

The China Compulsory Certification ensures that the contents of the shipment conform with safety and quality guidelines set out by the Chinese government.

It is mandatory for products in over 132 categories that China imports. Approximately 20% of US exports to China require this.

Note: CCC applications can take up to 90 days to process so verify whether it’s required for your shipment as soon as possible.


India

No Objection Certificate (NOC)

When shipping used electronics to India, a No Objection Certificate (NOC) must be obtained from the Ministry of Environment and Forest. Note that this falls under the responsibility of the importer.


Pre-Shipment Inspection Certificate

This certificate is required for all imports of scrap metal into India.


Vietnam

Certificate of Origin (COO)

This is a certificate submitted by an exporter listing goods to be imported and stating their place of origin.

The shipping documents listed above are general guidelines. SeaRates recommends getting contacting a destination agent for more destination- and cargo-specific information regarding documentation. We are able to provide details of trusted destination agents.


CUSTOMS DUTIES

Customs duties are part and parcel of all international shipments and this section covers how they are determined and calculated.


DETERMINING CUSTOMS DUTIES

The two most common ways to determine customs duties are ad valorem and specific.

Ad valorem - payments based on a fixed percentage rate on the value of goods - trade taxes, property taxes, most import taxes, and more.

 


 

Specific - rates are set in monetary terms per unit of goods, presented in physical units.

 


 

APPLICABLE CUSTOMS DUTIES RATE

The amount of duties depends on the Harmonized System (HS), which classifies goods by codes.

All other versions must be based on and adapted to the original six-digit HS codes.

For example, the US uses the HTS code and the European Union uses the TARIC code, both of which are adapted to the HS code.


CALCULATING US CUSTOMS DUTIES

The US calculates its custom duties based only on the commercial value of the goods.

How to calculate the amount of customs duties in the US?

1. Obtain your duty rate according to the HTS code.

2. (Duty rate) X (Commercial value of your goods)

Note that there are no US export duties.


CALCULATING SPAIN CUSTOMS DUTIES

There are more factors to consider when calculating duties into Spain.

Adjustments in the amount of customs duties depend on the selected Incoterms:

CIF or CIP: No adjustments required

CPT or CFR: Add cost of insurance

FOB or FCA: Add ocean freight and insurance costs


CALCULATING CUSTOMS DUTIES: PRACTICAL EXAMPLE

Determining customs duties may seem complicated. Here’s an example of a shipment of baskets from China to Spain.

 


 


 

CHINA CUSTOMS DUTIES

China is one of the US’ top trading partners. In 2017, the US exported $133 billion worth of products to China and imported $477 billion.

All goods entering China are subject to a value-added tax of either 13% or 17%, depending on the nature of the merchandise. When shipping from China to the US, note that China imposes export duties on a small number of goods.

There are two important factors to note when calculating China customs duties.


1. Economic Development Zones (EDZs)

There are various types of Economic Development Zones in China that provide financial incentives to imports and exports carried out to and from the area.

For instance, zones specially designated for trade and export purposes may mean exceptions to import duties and export rebates.


2. The US-China trade war

The US-China trade war is a relatively recent development but one that can have wide-ranging implications for global trade movements. Despite the recent signature of an agreement to ease the trade war, both countries have applied $735 billion worth of tariffs on each other’s goods. Today, many uncertainties remain.

To better understand how to benefit from China’s EDZs and for the latest development on US-China trade relations and how it affects shipments, speak to a freight forwarder or a destination agent in China.


INDIA CUSTOMS DUTIES

India’s customs duties can be hard to navigate due to their complexity and tendency for rate changes with little to no notice.

When exporting to India, aside from the basic import customs duties, additional charges apply, including a social welfare surcharge and an integrated goods and services tax.

India has increased import customs duties on various types of goods such as electronics in an effort to stimulate local manufacturing.

For more information on India customs duties, visit the official customs portal, ICEGATE, or speak to a local customs agent.


VIETNAM CUSTOMS DUTIES

Tariff rates in Vietnam have decreased since it joined the World Trade Organization (WTO) in 2007. Currently, most US exports to Vietnam face rates of 15% or lower.

Duty rates can vary significantly depending on the type of merchandise being imported. Consumer goods usually face higher import duties, particularly for luxury items, whereas merchandise such as production supplies, raw materials, and machinery are subject to lower duties.

Most goods being shipped from Vietnam are exempt from export duties with the exception of items such as minerals and scrap metal.


COVID-19 IMPACT ON OCEAN FREIGHT

Ocean freight accounts for 90% of world trade and any negative impact on logistics will have an effect on the global economy. The unprecedented conditions associated with the COVID-19 pandemic have resulted in countries closing their borders to all movement except essential goods in an effort to stop the spread of the virus. These measures and the resulting uncertainty has had a significant impact on global trade.  In fact, according to the World Trade Organization, world trade is expected to plunge by between 13% and 32% this year. The US’ logistics sector is expected to contract by as much as 12.4% in 2020.

 


 

EFFECT ON SHIPPERS AND SHIPPING LINES

The impact of COVID-19 and the subsequent fall in demand has affected every single player in the logistics industry and is proving extremely challenging for shippers. The uncertainty and the high number of blank sailing (cancellation) announcements by carriers in response to decreased demand have made it difficult to schedule exports.

By June, shipping carriers announced more than a hundred blanked sailings, which will last through to the end of the third quarter of the year.

 


 

According to Ports America, transpacific cancellations, usually at 15%, hit 40% in the final week of April.

At one point, up to 11.6% of the world’s container shipping fleet was idle.



 

Even though demand will eventually return, experts have predicted a 20% to 25% reduction in global shipping volumes in the second quarter of the year, which will be the biggest fall in history.

In an effort to secure a shipment date, many shippers have resorted to booking with more than one shipping line, sending cancellations and no shows skyrocketing which reduces work times for logistics workers, causing further hardship. As a result, importers and exporters face financial consequences such as rising demurrage and detention charges.


ADVICE FOR SHIPPERS

If you run into demurrage and detention as a result of COVID-19, speak to your carrier about the possibility of suspending or even waiving these charges.

Requests will be reviewed on a case by case basis and there’s no guarantee that they will be granted, but in the current environment, it is worth having the discussion.

There is still a high level of uncertainty surrounding economic conditions for the rest of the year and some analysts have declined to provide recovery estimates for 2021.

“These numbers are ugly – there is no getting around that. But a rapid, vigorous rebound is possible. Decisions taken now will determine the future shape of the recovery and global growth prospects.”  — states Sergey Dzhashitov, Head of SeaRates Operations.

Due to the fluidity and uncertainty of the situation, SeaRates recommends contacting a freight forwarder for the latest ocean freight updates surrounding COVID-19.


CONCLUSION

International trade plays a crucial role in the global economy. It is an extremely complex topic with many factors that can affect how trade is conducted between any two countries.

Note that the information here only serves as a guide and may change at any given time. For detailed information regarding shipping to and from Asia, SeaRates recommends contacting a freight forwarder or local agent.

For more shipping tips and resources, check out our blog.

Lilia Khovrak is a professional content manager from Odessa, Ukraine. Loves life by the sea.  Dreams to see Paris and eat a croissant on the thresholds of Notre Dame de Paris. Hates to read meaningless articles.


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