A Step by Step Guide To Ship And Import Your Product
What is the Best Way to Ship from China to the United States? This isn’t an easy question to answer because the truth is, it depends. Even experienced product managers could benefit from re-evaluating this from time to time.
I worked for a company several years ago that was importing a kind of athletic tape. Any kind of athletic or medical tape has to be FDA approved. Unfortunately, our tape got pulled for a random inspection at customs. The only thing customs told us was, “Fix labeling issues and submit it to CDRH with an import alert removal request.”
We were more than happy to comply. We called customs and asked them what the labeling issue was. They couldn’t tell us. We made our best guess and submitted updated packaging for them to review. They told us it was not approved, but would not tell us why.
We got the run-around for nearly 8 months. After multiple guesses and two trips to the port and one to the Denver customs office, we figured out that there was one word on the packaging that was not in compliance. When we finally identified it, we ordered 50k new packages and had our entire team in a warehouse for a week manually repacking everything.
The bigger impact it had on us is nearly all of our shipments were held at the port until this was resolved. We didn’t have any inventory. That meant we didn’t have any sales. It nearly put us out of business.
Is importing confusing? Yes. It can be. Is it complicated? Not necessarily. But, you do have to get a few things right.
Only The Critical Things You Need To Know
You could spend days learning about this. But we have simplified it for you by focussing on the critical things that matter for most shipments and not adding in any extra or unnecessary information.
We've set this article up with easy-to-read headers so you can quickly find the information you need. We've included some tips in this article that you won't find in any other article about importing. The tips come from hard-earned lessons. These are details that can make a big difference.
Let's start by looking at the 6 major steps of importing any product.
Overview Of The Importing Process
Here is a simple overview of the steps involved in importing your product after production.
The goods are packed and ready to be sent from the factory to a nearby port after production.
The order is delivered to a seaport or airport in the manufacturing country after being picked up at the factory. It will need to pass customs in the exporting nation. Here, taxes and duties from the importing countries will be applied. The factory will pay the cost of transporting and exporting goods if your terms are FOB. You will pay them if your terms are Exworks.
It takes around 18-22 days for cargo to cross the ocean and arrive in The United States, depending on the port city. Airfreight shipments typically arrive in 5-15 days under normal circumstances.
After the shipment arrives, the goods are placed in a customs warehouse, where they wait for clearance from the importing government. Documents relating to imported items and any applicable taxes will be recorded by customs. If necessary, materials may be checked manually after being scanned into a database. This usually takes 7-10 days to complete under normal circumstances.
After your order enters the importing country, it will be delivered to your warehouse by truck or train. You can choose the shipping method based on the cost, how easy it is to transport, and how much time you have. Usually, ground transportation takes 3-8 days from the port to your location.
The usual time it takes for a product to go from the factory to your warehouse is 33-40 days if you use ocean cargo. If you use air cargo, it will take 5 - 15 days.
Now that you have an understanding of the key steps, let’s dig into the best practices to see where you can make improvements.
Important Shipping Terms To Know
Make sure you understand how the factory quoted your product before you start production. The two most common quote terms are EXW and FOB. This has to do with how your products are delivered after production is complete. It can have a big impact on your final landed cost and risk.
FOB (Freight On Board)
It means that the factory is responsible for your products up to the point of transfer listed on the terms. For example, a common term would be FOB Shanghai port. This means the factory is responsible for the transportation of your products to the port of shipment and the cost of exporting and loading. The buyer would pay for the cost of ocean freight from the port, insurance, unloading, and ground transportation to their own warehouse.
It’s pretty common for factories to initially give you a unit cost quote with exworks terms. It means they haven’t calculated any of the transportation costs into the unit cost yet. If these are the final terms of the PO, EXW means that you will be responsible for the risk and transportation costs from the factory’s loading doc all the way to your warehouse.
VAT Tax (Value Added Tax)
This is a sales tax that the government charges on imported goods at the time of importation into your country. This can be around 15% depending on your product classification. Where this gets interesting is Chinese factories can get a rebate on any VAT tax they've paid when they export your product. If a factory is shipping EXW, they won't get this rebate. That means that the unit cost for EXW can sometimes be higher than FOB, even though the factory is paying to deliver your goods to the port with FOB terms. This is a fun fact to keep in your back pocket when you are negotiating unit costs.
Best Practices For Packing Your Products
These best practices will help you to save time, money and reduce shipping damages. We see so many good products get destroyed during transit. Don’t let this happen to you. Take the time to do it right.
Carefully Choose Your Export Cartons and Packaging
Use sample shipments to test your product packaging at the same time as you develop it. We see so many good goods get destroyed during transit. Consider that for a moment. How are you going to protect your products? Do some tests before you make any decisions. Put your prototype in the packaging you intend to use and send it across the nation to your cousin's uncle, then back if necessary, just so you can observe how effectively the packaging is.
What I'm going to plug right now is to think about sustainability in your packaging. Packaging typically goes straight in the garbage. Usually, the cheapest and easiest way to package something - a lot of times clamshell plastic packaging - or a cheap way to protect things is foam - is terrible for the environment. Sustainable packaging takes a little bit more thought. Could you use recycled cardboard, crumpled paper, or more eco-friendly ink?
Making your product packaging more environmentally friendly can be an easy way to make your business more sustainable. Many times, it only costs a few cents more to make this change, and it can have a big impact on the environment. We advise our clients on how to make these changes so they can be more sustainable and reduce their impact on the planet.
Think About Where You Will Unload And Store Your Products
Make sure that you know if the facility has forklifts or at least a pallet jack to unload the containers. If you are using a warehouse, make sure that it is temperature-controlled and has space for your products.
Questions to think about:
How are you going to unload it?
Will you store it in an office or warehouse?
Does your product need to be stored in a climate-controlled area?
Do you have a forklift to unload it?
How will you pack your shipments to your customers?
Know Your Shipping Options (Timing and Costs)
Freight forwarders can help you choose the best shipping option for your products. They have experience with different shipping companies and will be able to advise you on the best way to ship your product, as well as the cost and time frame.
Here are some questions to think about:
How much will it cost me?
How long will it take to ship my product?
What are the benefits and drawbacks of these options?
Common Shipping Options:
There are advantages and disadvantages to the way you transport your items in terms of security, Theft, or harm caused by shipping.
Small packages are usually shipped by DHL, Fedex, or UPS. This is your fastest option, but most expensive. Unfortunately, it's not impossible for boxes to go mixing or get seriously delayed if you ship several boxes together in one shipment. This is also the shipping method that will cause the most damage to your products in transit so plan to package them well.
Airfreight is the second-fastest shipping method. It may take a few days longer than small parcel and it's not as expensive as air freight. The drawback is that this type of shipping tends to be more expensive per piece, but will get there much faster.
Ocean freight can be shipped in different ways:
Less than a Container Load (LCL)
When you don't have enough product to fill an entire container, you can choose to share a container with other companies. This is one of the most economical ways to ship products, but it takes longer and there is a higher chance for damage.
Full Container Load (FCL)
You will be shipping the entire container to your customer. This is the least expensive option per unit as long as you can fill the container with your order. It is also the most secure because the container can remain locked all the way to your final destination. It can also move through customs the fastest and has the lowest risk of damaging your products.
Time In Transit:
The typical number of days it takes to ship cargo from China to the US Door-to-Door under normal circumstances (Pre-Covid):
1 - 5 Days - Small Parcel shipments by UPS, Fedex, DHL, etc.
5-15 Days - Air Freight
33-40 Days – Ocean Freight to the West Coast
43-50 Days – Ocean Freight to the East Coast
Unfortunately, due to the impact of Coronavirus on China shipping, shipping can take significantly longer than normal at this time.
Current door-to-door times by Sea to the west coast are 45-50 days. We've seen that come down substantially from its peak in November of 2021.
Freight rates are always changing, just like the price of fuel does! There's a busy season during Q3 and Q4 where you'll find more ships in port and higher shipping costs. This is especially true in the month before Chinese New Year. It's usually slower and less expensive during Q1 after CNY and Q2.
With all of the supply chain issues that COVID has caused, the cost of shipping has never been higher. Even though ocean freight is coming back down significantly, ground transportation costs are still unbearably high.
Shipping costs are quoted by the container size for Full Container Loads (FCL). They are quoted by cubic meters (CBM) if you are shipping less than a full container load (LCL) or air freight.
The easiest way to calculate your freight cost is to contact a freight forwarding company. More on that below.
Know Who To Contact (Freight Forwarders)
A freight forwarder is a company that can help you with all the shipping and customs paperwork. They will work with you to choose the best shipping method for your products and give you a quote for the cost of shipping.
There are many freight forwarding companies out there, so it's important to do your research before choosing one. Ask friends or other entrepreneurs for recommendations. If you don't know anyone, look at reviews on Google and Facebook to see what past customers have said about their service.
You can also ask your supplier to recommend a freight forwarding company, but you still need to do your homework. It's not uncommon for them to receive kickbacks from that forwarder which could sway their recommendation.
Here's a quick read on How to choose a good freight forwarder if you want to know more.
Finally, you have to get through customs. This can be the most confusing step for people.
Know The Basic Requirements For Customs
Here are a few of the basic things that you need to know about when you ship internationally:
Formal vs Informal Custom Entry Procedures
The type of product you are importing, the value of the shipment, and your relationship with customs will determine which entry procedure to use. Customs has two types of procedures: formal and informal.
A formal entry is used for shipments that have a value over $2500 or when there is no previous trade history between the importer and exporter.
An informal entry is used for shipments that have a value of $2500 or less and when there is a previous trade relationship between the importer and exporter. This allows you to save time, energy and money as long as you stay under the required dollar amount threshold.
If your shipment is small enough, it may make sense to split the shipment up into two or three different small parcel shipments in order to stay under the $2500 threshold.
We'll keep this really simple. Here are the two labels that matter for most shipments.
Country of Origin Requirements - Your product has to be clearly labeled with the country of origin on both the outer cartons and product packaging. Here is the FTC Link on labeling. If this isn’t done correctly, your goods could be seized by customs.
Vendor Labeling Requirements - It’s common for vendors like Amazon, Walmart, and Target to have specific labeling requirements for your products. Your life will be easier if you know what these are ahead of time and have your factory directly print the required labels on your packages.
Required Documents For Customs
Depending on your shipment, you may need additional documents, but for the vast majority of imports, these are the three required documents.
BOL (Bill of Lading)
This document is like a title to the goods. It works as a receipt of freight services, a contract between a freight carrier and shipper and a document of title. It is an acknowledgment that the goods have been loaded and contains the terms of the contract of carriage.
The commercial invoice is one of the main documents used by customs in determining customs duties. It describes the sold goods and the agreed-upon price of those goods. The commercial invoice is the primary document used for import control, valuation, and duty determination.
A packing list provides the exporter, international freight forwarder, and ultimate importer with information about the shipment, including how it's packed, the dimensions and weight of each package, and the marks and numbers that are noted on the outside of the boxes. Your broker will usually request this document along with the BOL and Commercial Invoice to make sure they all match.
A good freight forwarding company will handle all of this for you. But, these are the critical few things for you to be aware of. Here’s a video from Customs and Border protection that goes into more detail about the importing process.
HTS Codes (Harmonized Tariff Schedule)
This is a 10-digit import classification system that is specific to the United States. Your duties are assessed based on this classification. An HTS code takes the same form as an HS code (HS Codes are the international standard) for the first six digits and then has four differing last digits. Your freight forwarder will typically work with a customs broker that will help you figure this out. You shouldn’t have to do this on your own. But, if you are feeling ambitious, you can do your own research to find the lowest cost, legally applicable HTS Code for importing. Here is the link to lookup HTS codes online on the official government website.
Duties are a tax on the products you are importing. They are usually based on the value of the goods that are imported. Depending on the context, import duty may also be referred to as customs duty, tariff, import tax, and import tariff. The duties are based on the HTS code of your products. If you know your HTS code, you can lookup tariff rate here. It’s a good idea to work with a customs broker to figure this out because most HTS codes are currently subject to any additional Trump tariffs. That can be confusing and it can be a huge additional cost depending on which list your HTS code is on.
You can get a single entry or continual bond depending on how frequently you plan to import. You only need a bond for imports valued at more than $2500. Your freight forwarder can arrange this through a licensed Customs broker. It’s basically a contract between you, a Surety company, and US Customs and Border Protection (CBP) that guarantees that you will comply with Customs regulations. It also guarantees payment of additional import duties, taxes, fines, and penalties, allowing CBP to clear the shipment without having to wait for additional payment.
Occasionally your shipments will be inspected by US Customs. This is usually an X-Ray exam but can be more detailed. These can be random or as a result of doubts regarding the customs declaration, monitoring, or suspicion of smuggling or trademark violations. Here is a link that goes into more detail. Examining the Issue: A Behind the Scenes Look at Customs Inspections.
Know The Basics To Avoid Expensive Mistakes
If you’re looking to import products from China, this guide will give you a step-by-step overview of what to expect.
By understanding the process and important shipping terms, you can avoid expensive mistakes and ensure your products arrive safely at their destination.
We know it can be daunting to take on a project like this yourself, so please don’t hesitate to get in touch with us if you need help navigating these waters. With our years of experience importing products from China, we’re more than happy to assist you every step of the way. Feel free to get in touch by scheduling a call or by email.