Facing FBA inventory storage limit?

International business transactions always have commercial risks involved, and we are not in a position to recommend the payment terms. Depending on the value of the goods, trust, and relationships with suppliers, the payment terms of our customers range from 100% pre-payment to 100% post-payment. However, it seems that when dealing with vendors in China, the most common payment term is 30% pre-payment. Then, against a copy of the bill of lading provided by the vendor, the rest of the balance is paid after the shipment occurs. The vendor would normally retain control over the cargo by means of the original bill of lading, until a Telex Release is issued.

Since the original bill of lading (B/L) is not only a contract of carriage and a receipt but also a document of title to the goods, the vendor can potentially still retain ownership and control over the goods. This happens when, at the request of the shipper, the original B/L is issued, and the goods are accepted for transportation.

If the original B/L is issued, there are two ways for the consignee to obtain a release of the goods: by presenting one endorsed copy of the original B/L to SC Integrators in Canada or by surrendering all copies of the original B/L back to the issuing office and arranging a Telex Release (T/R), which is an electronic message sent from the origin office confirming the surrender of the original B/L.

To present an endorsed copy of the original (physical) B/L to SC Integrators, the shipper must courier it to the consignee (normally a set of 3 original copies of the original B/L is issued). The consignee must then endorse one copy (after noting the company details on the reverse side of the document, sign and stamp it) and then courier it to SC Integrators. This variant is quite complicated and costly.

A lost or delayed original B/L can prevent the release of the goods and result in storage and demurrage charges. To avoid such a situation, please ask the vendor to surrender the original B/L back to the issuing office and request a Telex Release. Once the T/R message is received, the goods can be released to the consignee. The surrender and Telex Release of the original B/L is the most common way of releasing goods.

The last option is to have your goods delivered automatically by requesting that your vendor ship on an express bill of lading with no original B/L issued. Unlike the original B/L, the express bill of lading is not a document of title and doesn’t require release. This option is normally agreed upon with the vendor when a balance payment for the goods is made before the shipment.

The Incoterms (International Commercial Terms) is a set of rules published by the International Chamber of Commerce that outline the responsibilities of sellers and buyers for the delivery of goods in international commerce. Using pre-defined terms helps to eliminate ambiguity in the interpretation of obligations, costs, and risks by the buyer and seller. You can find more information on the current 11 rules in use here.

When the buyer and seller enter into an international sale of goods contract, they would normally agree upon a specific Incoterms rule they would like to apply to their agreement.

The most popular rule used for goods shipped across the ocean is FOB (free on board) (named port of shipment, e.g. FOB Shanghai port). Under FOB terms, the vendor assumes all risks and costs up to the moment the goods are loaded onto the vessel, including export customs clearance.

Quite often, vendors insist on Ex Works (EXW) terms for smaller, Less-than-Container (LCL) shipments. Under the EXW rule, the seller is only responsible for making the goods available at their premises. When agreeing on EXW terms, rather than FOB, the buyer should realize that he or she not only assumes additional expenses but also enters into possession of the goods in a foreign country and assumes all risks (for example, export customs examination expenses and potential non-compliance issues).

Another, suboptimal from our point of view, alternative to FOB would be Incoterms rules that include ocean transportation into the selling price of the goods and makes the vendor responsible for it, such as, CIF, DAP, DDP. It is common for vendors to offer an attractive rate for pre-paid ocean transportation. When the buyer agrees to these terms, they lose the ability to choose their own reliable transportation provider, and they sometimes have no means of verifying that the shipment is actually shipped. Then, they are often slammed with additional arrival charges from the agent delivering the goods, who holds the goods ransom until the payment is made.

The answer is yes and no. Yes, we can ship all your shipments from different suppliers, and the shipments could be potentially loaded in the same container and shipped on the same vessel. However, since each of your shipments is covered by a separate commercial invoice, there would be separate sets of shipping documents. Furthermore, there would be also additional origin warehouse and documentary expenses compared to a single vendor shipment. Therefore, we normally treat shipments from different vendors as separate shipments. However, on a case-by-case basis, we can partially reduce your shipping and customs brokerage fees. Combining separate shipments typically only makes sense if the vendors are in the same region and the loads are ready around the same time.

There are two workarounds for consolidating shipments from different vendors. Each has its own pros and cons. First, if you have good relationships with one of the vendors, you can ask them to acquire goods from another supplier for you. Then, you can have these goods shipped to them and eventually export with your other goods under a single commercial invoice. Since each vendor in China can export only certain kind of goods, these would only work for the products in the same category. This workaround may also not work in the event of competing vendors. Second, you can hire a trading company in China that would acquire, consolidate, and export goods for you under their own name.

SC Integrators’ LCL ocean shipping rates are economical, and customers often find that consolidating their goods from different vendors is not worth the trouble.

Most international ocean shipments get insured, and we strongly encourage you to select the cargo insurance option when requesting a quote and booking. Without insurance, if cargo is lost or damaged, you are bound by the liability limits specified in the bill of lading terms of the participating carrier. Those liability limits could be as low as $2.00 per kilo of the gross weight of the goods lost or damaged, or $500 per package or shipping unit. It must be also established that the carrier is at fault for the damaged or lost cargo.

Another benefit of having marine cargo insurance is general average coverage. General average is one of the oldest maritime principles and laws, and it is believed to have been included for the first time in the Rhodes Maritime Code, circa 800 BC. General average principle decrees that all owners of the cargo loaded onto the ship proportionally share the losses resulting from the sacrifices made to save the ship and crew in case of emergency. General averages are declared, for example, when the crew must throw some cargo overboard (jettison) to lighten the sinking ship, or if a major fire occurs. Even if your cargo is intact, you would have to pay for a portion of the losses to the other cargo, ship, and emergency incident handling. One of the most recent cases of a general average being declared was during a fire on the Yantian Express on January 3, 2019 off the Canadian shore.

The marine cargo insurance allows for cargo to be insured up to 110% of the CIF value (cost + insurance + freight). This extra 10% is intended to cover administrative costs of reordering replacement goods.

Yes, our marine cargo insurance is subject to a $500 deductible in the event of any one accident or occurrence. For more information on the cargo insurance terms and conditions, please refer to your insurance certificate and policy.

When LCL goods are accepted for transportation, our warehouses only inspect the outside packaging of the shipping unit for signs of damage. We don’t check the condition, quality, or count the quantity of the goods inside the shipping packages or units. We recommend hiring a professional inspection company to do a quality inspection at the vendor’s premises before shipment.

Please send labels to your vendor and ask them to apply them before transferring the goods over to our warehouse.