You should watch out for the transportation trap when ordering transportation from China. Unfortunately, it is common practice to try and cheat transportation buyers out of their hard earned money using the method described below.
How the transportation trap looks from your perspective
Your newly started company has designed a shockproof iPad cover, and you have discovered that there is a market for it in the UK. You have found a supplier in Shanghai, and you are in the process of placing your first order for your newly developed product, which will be a shipment of five cubic metre. During the negotiations, your supplier offers to handle the transportation because he has some transportation agreements in place. It will only cost you £210. It seems like a good deal, so you accept the offer right away.
The goods are ready by the agreed upon date and are shipping by sea. Roughly one month later a UK freight forwarder calls and tells you that the products are available at his warehouse. You have to pay the amount of £780 to get your goods delivered. That comes very unexpectedly because you already paid your supplier to handle the transportation. And even if you had to pay for the delivery in the UK, you think it is way too much to pay for just the delivery.
A significant part of your profits from this shipment seems to have already vanished into thin air. You ask around and discover that local charges, including customs clearance and delivery, should not amount to more than £120. You talk to the freight forwarder and explain that it cannot be correct and that you do not want to pay anything because the supplier has already paid for the shipment of your goods. The UK freight forwarder gets back to you and tells you that he needs to have his costs covered and that you are not getting your goods until the amount has been paid in full. He also does not allow you to hire another freight forwarder to handle the delivery.
You now have the option to either pay the amount of £780 or let the freight forwarder keep your iPad covers.
Does it sound familiar?
What happens in reality
How does the transportation trap start? When your supplier lands your order, he calls his usual Chinese freight forwarder. The supplier requests a quote for the shipment to the UK. The freight forwarder in China notices in his systems that the price for getting the five cubic metre cargo shipped to the UK is £350. However, as per usual, the Chinese freight forwarder sends a quote for £210 to the supplier, and furthermore, offers the supplier a kick-back for £100, if he wins the order. It is a good deal for your supplier, so he accepts the offer.
After that, the freight forwarder in China contacts his UK partner, as mentioned above, and tells him that he may handle the transportation within the UK for a fee of £500. The UK freight forwarder accepts. When the goods arrive, the UK freight forwarder sends you an invoice for the amount of £780 and wires the £500 back to the freight forwarder in China.
The result
- You end up paying £990 for the transportation (£210 to your supplier and £780 to the UK freight forwarder)
- The supplier has earned £100 on the shipping he sold you “without any profits”
- The Chinese freight forwarder has made £500 + £210 – £100 – £350 = £260 more than he should have made
- The UK forwarder has made £780 – £500 – £120 = £160 more than he should have made
- The entire shipment amounted to £990, and you thought it only was supposed to be £210. It should have been £350 + £120 = £470. This amount (£470) includes the profits for both the Chinese and UK freight forwarder.
An example
Below is a real-life example of how a freight forwarder quotes. The freight forwarder sent this invoice to an import customer where the supplier was supposed to have handled the shipment. Are you able to figure out what each one of the lines on the invoice means?
Conclusion
If you are offered cheap transportation, or in some cases free shipping, you should decline the offer, if you do not wish to end up in the transportation trap. In most cases, you will still end up paying for the transportation, and it will most likely end up being much more expensive than you initially thought.
The solution is that you insist paying for the transportation yourself. You should discuss the options of either an EXW – or FOB shipment with your supplier (read more about the different incoterms here). Subsequently, you should find an honest UK freight forwarder, who you pay and who works for you directly. When you are making a deal with the freight forwarder, you should also ask for an ‘all-in’ price. This way, you will avoid any unexpected extra costs before you can have your goods delivered.
In other words, you need to assume responsibility for the shipment yourself. Otherwise, you will most likely get “robbed in broad daylight”.
One way, however, to avoid the hassle all together is to order your transportation here on the Transporteca platform. We always ship all the way to the address of your choosing, and our prices are always all-in.
You can search for shipping prices by simply clicking the button below.