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The pitfalls of accepting 'free freight' from Chinese suppliers
7/31/2020
For many UK importers, allowing their Chinese suppliers to pay for freight sounds like a great deal...
THERE IS NO SUCH THING AS A FREE LUNCH
For many UK importers, allowing their Chinese suppliers to pay for freight sounds like a great deal. However, there's no such thing as a free lunch.

For many years now, UK importers have fallen into the trap of letting their Chinese suppliers ‘pay’ for freight of LCL (Less than Container Load) shipments from China to the UK.

On the face of it, it seems like a great deal. The supplier is offering to pay the freight costs and is taking on the headache of arranging the shipment. However, the reality couldn’t be further from the truth.

The actual arrangement involves Chinese consolidators (in conjunction with their UK counterparts) offering the suppliers a ‘rebate’ scheme. In return for using their consolidation service to the UK, the consolidators will offer the supplier a rebate of up to £200 per cubic metre of freight given to them.

Someone somewhere has to recover this amount of money being offered, and in simple terms, that someone will be the UK importer.

When the shipment arrives in the UK, the importer will be made to pay overinflated, made-up costs so that the consolidator recovers the ‘rebate’ and can share these unscrupulous profits with their UK counterparts.
On their notice of arrivals document, they will see made-up charges such as:

– Interim Currency Adjustment Surcharge
– Currency Adjustment Factor
– China Import Service Fee

As the freight was pre-paid, there is no currency that needs to be exchanged or adjusted. This is just a made-up charge. There are also service fees for documentation that can be well over £100, or terminal handling charges that are almost double what the industry norm.

Unfortunately, once the shipment arrives, there is no legislation on what the consolidators can charge. They can simply make their own tariff charges and will not release the shipment to the UK customer until all charges are settled.

So it is important that all importers are aware of the pitfalls of accepting ‘free shipping’ – there really is no such thing – and it's likely to end up costing more in the long run. For importers looking to bring in goods from their Chinese suppliers, it’s important that they speak to UK professionals who have experience in the China market, introduce us to your supplier so we can assist.

It is advised that importers purchase shipments on a Free On Board (FOB) basis, which enables the importer to control the charges and the schedule. This Incoterm rule specifies that all local charges in China are paid by the supplier's account and the UK charges are controlled with the importer's forwarder. There should be no hidden costs involved when receiving shipments through a reputable forwarder.

For more information on importing from China, contact [email protected]

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