How to calculate the total cost of imported goods from China
Reasons why people choose to import from China or other countries
1. There’s no local supply or local products do not have equivalent quality.
2. Imported goods are more competitive in price than local products.
Undoubtedly, B is the main reason for most importers, and same reason keeps global shipping business running.
The total cost, is for a product one needs to pay, from seller’s warehouse/manufacturer to the buyer’s warehouse or consumers’ site, which, briefly speaking, equals product cost plus shipping cost, i.e. total cost = product cost + shipping cost. No one wants the trouble of importing and finding the product costs more than they can sell it for.
Finding the right supplier and getting a quotation is just the first step.
Incoterm or International Commercial Terms, define respective obligations, costs, and risks involved in the delivery of goods and when and how they shift from the seller to the buyer.
EXW: buyer pays everything in transport
DDP: seller pays everything
FOB: seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays the cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination.
In most cases of international trade, people work with FOB term. Incoterms are for seller and buyer to decide, or never mind, the terms define who takes the risks and responsibilities. Whatever incoterm you come to agreement with supplier, it doesn’t change the cost structure, but decides who pays what.
Product cost is simple, just the EXW price you get from supplier. Let’s move on to the shipping part.
Total shipping cost = Origin Charges + Ocean Freight/Air Freight + Destination Charges
Origin Charges (to be paid by supplier when FOB) consists of:
Warehousing & consolidation (if needed)
Loading, transport from factory/warehouse to seaport/airport
Shipping line local charges such as THC/ORC, DOC, ISPS, SEAL, EIR, etc (AMS, ISF for USA, ACI for Canada and ENS for Europe)
Ocean Freight/Air Freight
Ocean freight/Air Freight refers to the port-to-port cost or airport-to-airport cost, changes frequently, twice a month or even weekly.
Each country and even each port can be different, but basically consists of the charges below.
Carrier destination charges (DOC, DTHC, etc): each carrier and each port can be different
Customs clearance (Customs bonds for US importers)
Haulage/delivery (from POD or destination airport to final address)
Import duty/tariff and other tariff