Sure shot cost cutting tips for Exporters & Importers

The intention here is to provide cost cutting tips to exporters and importers which can be used instantly. I assure you that reading this article would prove fruitful.

We begin with, the role of freight forwarders.

Freight forwarders are supposed to bridge the gap between the actual carriers, i.e., Shipping Companies/ Airlines and exporters/importers and in the process earn their commission from the airline/ shipping line.

Shipping lines and airlines, to compete amongst themselves, started offering price-concessions to the freight forwarders who brought larger cargoes to them in ready-to-ship form.

Now, there are so many freight forwarders all competing amongst themselves that it has become quite difficult for anyone to survive easily.

Still, there are some companies which truly do consolidation and earn good margins through the hard work that they put in but 99% of them indulge in activities which cannot be called ethical because they try to exploit ignorance amongst the trading community.

What is really wrong is that many freight forwarders bill their customers charges which just cannot be justified. Here cost cutting tips will help you negotiate better rates with your freight forwarder.

Please note that the following cost cutting tips would bring down your freight forwarding cost instantly:

1. This is No.1 Cost Cutting Tip. Check the Exchange Rate at which your freight forwarder is converting his freight-bills into local currency.

Since freight rates are usually quoted in USD, almost all the freight forwarders inflate the exchange rate to earn extra revenue without actually declaring it to their clients. This is the No.1 Cost cutting tip and you can easily use it to your advantage.

2. Check the 'Currency Adjustment Factor (CAF)' and 'Charges Collect Fee (CC FEE)' that your freight forwarder may be charging you for Import movements.

Remember that these charges are usually not incurred by the freight forwarders because all of them actually pay freight at origin. They would not accept it but that is a fact. Hence, you can negotiate on both these charges.

Before I move on to next Cost Cutting Tip, did you ever notice your freight forwarder charging you CC Fee on the ENTIRE Collect Amount, if not, please recheck because they are actually entitled to charge you the same, if you have agreed for it, technically only on AIRFREIGHT CHARGES not on any other origin charges.

3. Ask your freight forwarder if he would move cargo on MASTER or HOUSE AWB / BL. If he uses a HOUSE, remember that he may be moving the cargo on as a 'console'. In other words he would not move your cargo as a stand alone shipment but along with many other shipments.

The side effect is that the freight forwarder would wait for the flight on which they have console-space booked. In such cases, your cargo would move on a much lesser rate than what is being quoted to you. This is beneficial to the freight forwarder but this may delay your cargo.

Hence, if you have an urgent air-shipment then ask your freight forwarder to move on first available flight and on MASTER AWB. If he insists on using house then you can negotiate on Freight-Rate, CC FEE and CAF.

4. If your cargo's wt. is more than it's volumetric wt. i.e., if it is a DENSE CARGO then you can ask for 5% to 10% lower rate than usual rates because most of the airlines give such discount to the Forwarders.

For more such Cost Cutting Tips please keep scrolling down..

5. If your cargo's volumetric wt. is more than 500kg then you can get much lesser rate that Book-Rate because +500kg is counted as BIG Cargo and airlines are ready to offer discounts.

6. Ask your Supplier to also quote his charges if he were to deliver the cargo up to the Port-of-Discharge and compare it with your local freight forwarder's rates.

99% of the times your supplier would quote you a much better rate because being an exporter himself, he usually already has an ongoing relationship with local freight forwarders or shipping company which works out cheaper than any body else's rates.

It would also make your life, as an importer, easier because you would not have to worry about the hassles of coordinating with freight forwarder for movement. This would save you a lot of time and time saved = money saved.

7. Most of the times when you ask for rates, freight forwarder would quote you only up to port of discharge. They never quote the Destination Charges, start asking for it because some freight forwarders hide their cost while quoting their port-to-port rates and then put their charges in the form of Destination Charges. Importer has no option but to pay for it to get the DO from them.

8. In case of Less Than Container Load (LCL) shipments, have you ever asked your freight forwarder to tell you how many DOs will be involved, if not, ask them because most of the freight forwarders are not the real consolidators.

They hand over your cargo to some other freight forwarder (who does the consolidation) and at Destination when the cargo lands you would be surprised to see two/three DO Charges: 1) Your Freight Forwarder, 2) The Actual Consolidator and may be some times 3) the second person whom your freight forwarder handed over the cargo again hand overs the cargo to someone else.

We recently came across a case where an international logistics company charged importer their Freight+DO Charges and then actual consolidator charged the Importer DO Charges to the tune of Rs.14067/- for a 1.9mt LCL import shipment at Nhava Sheva.

Scroll down for more tips..

10. If you import airfreight, did you ever notice that your freight forwarder makes huge amounts of money for just handing over the Document to you.

They charge you under various headings like, Airline Cartage, Break Bulk Charges, C.C. Fee, IGM Filing Charges, Courier, DO Charges, MAWB Fees. Do you know that except for the MAWB Fee which they pay to Airline, the rest of the charges are all their own.

They literally make a killing in the name of Delivery Order. A large freight forwarding company recently sent a Bill of Rs.5150/- (excluding freight & taxes) for an import shipment of 5kg. I advised the importer to speak with the Freight Forwarder and they got a concession of Rs.1500/-.

11. Please note that most of the freight forwarders earn 95% of their profits through 'consolidation'. They may also offer to provide customs clearance services but most of them are lousy with it because that is not their core function.

To know more on how you can save on Customs Clearance click on the Tab 'Clearance-Tips' on the left where we have described the subject in detail.

12. Did you ever notice one point: the freight forwarders have better rates from the home locations. So when you choose a freight forwarder, if you want to nominate one for your imports, then look for someone who has a head-office in your supplier's city/ country.

This will help you in getting a much better rate than somebody else. Also note that the same holds good for airline rates and shipping line rates. If a carrier has origin where you are importing from, usually they will give you better rates.

The same holds good more for exports to the same country where the carriers/ freight forwarder has its head-office.

Many more such cost cutting tips will appear in due course... so keep visiting!