Searates' Asia Shipping Guide: A must read for importers and exporters
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 one of its many competitive advantages. 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 are risks associated with trading in general and it is important to be aware of the various regulations and conditions in place. This helps to avoid costly delays and create a smooth experience for shippers and their clients.
Here is a know-how of managing shipments between Asia with a specific 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 and ocean freight shipments
TRANSIT TIMES TO AND FROM ASIA
When planning an ocean freight shipment, it is essential to consider the transit times involved. Below are the average transit times to countries in Southeast Asia and the Far East, such as China, India, and Vietnam.
These times are average estimations, but actual shipping times may vary, depending on the number of transits, 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 reasons. Hence, it is 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, it 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.
3. Port of Ningbo-Zhoushan
In 2012 the Port of Ningbo-Zhoushan became the world’s busiest port and currently exceeds 100 million tons per year.
MAJOR PORTS IN INDIA
1. Jawaharlal Nehru Port
The Jawaharlal Nehru port was founded in 1989 and is India’s largest port, handling over 55% of the country’s container cargo.
2. Port of Chennai
Founded in 1881, it 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
It is a major port system located in Central Vietnam and is the third-largest port system.
2. Hai Phong Port
Established in 1874, Hai Phong Port is one of the region’s oldest ports, and serves as a gateway for Northern Vietnam.
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. Here is SeaRates' recommendations for the most suitable incoterms for the Asian market.
CPT Incoterm (Carriage Paid To)
CPT incoterm indicates that the supplier can consider delivery to be complete when export customs procedures are complete, and the goods are transferred to the forwarder for transportation to a designated destination. Once 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.
Read more 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 that delivery is complete once 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.
Read more 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.
Here is more information on DAP.
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 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).
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.
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. It states that importers only take control of the cargo at the destination, which seems to place 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. 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.
As a result of this risk, SeaRates recommends that CIP should only be used in instances when dealing with a trusted agent, where the recipient is listed as a consignee, or use FCA incoterm.
Here are the most important shipping documents needed for ocean freight to and from Asia.
STANDARD OCEAN FREIGHT DOCUMENTS
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. It is used for an exchange or transfer from one carrier to another, and is necessary to complete the trip.
Even minor errors can cause lengthy delays and 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 person'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.
The POA must be signed by an authorised representative of the company.
The packing list provides 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.
The commercial invoice provides the bearer with the ability to claim payment for goods supplied under conditions agreed between seller and buyer.
This section briefly covers some of the specific import documentation required when shipping to Spain, the US, China, and India.
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.
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 applying on the Spanish tax authority website.
China Compulsory Certification (CCC)
This 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 imported by China. 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.
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. This falls under the responsibility of the importer.
Pre-Shipment Inspection Certificate
This certificate is required for all imports of scrap metal into India.
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 in touch with a destination agent for more destination and cargo-specific information regarding documentation. We are able to provide details of trusted destination agents.
Customs duties are a 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 such as trade taxes, property taxes, most import taxes, and more.
Specific - rates are set in monetary terms per unit of goods and 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.
1. Obtain your duty rate according to the HTS code.
2. (Duty rate) X (Commercial value of your goods)
CALCULATING SPAIN CUSTOM DUTIES
Adjustments in the amount of customs duties is dependant 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, 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 include exceptions to import duties and export rebates.
2. The trade dispute between US and China
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.
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 can 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.
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 skyrocketing which reduces work times for logistics workers. 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.
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.
The information here only serves as a guide and may change at any given time.
At SeaRates, we compare all available cargo delivery options at your request and arrange their transportation and insurance. We also provide you with over 500K ocean freight quotes, and give you access to the latest international shipping rates from any carrier in seconds.
Read on for more in-depth shipping tips and resources.
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