When shipping globally or cross-border, it's important to carefully review your carrier contract to avoid costly mistakes. International shipping is significantly more complex than domestic shipping due to differences in regulations, taxes, and logistics. Below are some key considerations, common pitfalls, and potential concessions to ask for to save money when navigating international shipping contracts.

1. Understanding the Basics of Carrier Contracts

Carrier contracts outline the terms and conditions of your relationship with the shipping company. These contracts typically cover various aspects such as:

• Rates and fees: The cost of shipping, including base rates, surcharges, and accessorial fees.
• Liability and insurance: The carrier's responsibility for lost or damaged goods and the insurance coverage offered.
• Delivery times: The expected time frame for deliveries and any guarantees or penalties related to delays.
• Service levels: The different types of services offered such as express, standard, economy, and associated costs.
• Customs and duties: The handling of customs clearance and payment of duties and taxes for international shipments.

2. Key Differences Between Domestic and International Shipping Contracts

While many aspects of domestic and international shipping contracts overlap, several critical differences require attention:

Customs and Duties

• Domestic Contracts: Do not involve customs clearance or duties.
• International Contracts: Must include clauses about who is responsible for customs clearance and payment of duties and taxes. In most cases, the importer (receiver) pays these costs, but this can be negotiated.

Surcharges and Fees

• Domestic Contracts: Will have standard surcharges like fuel, additional handling, and residential delivery fees.
• International Contracts: Often have additional surcharges, such as customs handling fees, remote area surcharges, tax forwarding, disbursement, and currency adjustment factors.

Delivery Times

• Domestic Contracts: Delivery times are usually more predictable and come with stronger guarantees.
• International Contracts: Delivery times can be affected by customs delays, international holidays, and geopolitical issues. The contract should specify how such delays are handled and whether any penalties apply.

3. Pitfalls to Avoid When First Shipping Internationally

New shippers often overlook critical aspects of international shipping, leading to unexpected costs and delays. Here are some common pitfalls:

Ignoring Customs Regulations

Every country has its own customs regulations, and failing to comply can result in shipments being delayed, returned, confiscated, or penalties assessed. Ensure your carrier contract clearly outlines the process for customs clearance and specifies who is responsible for compliance.

Overlooking Incoterms

Incoterms (International Commercial Terms) define the responsibilities of buyers and sellers in international transactions, including who is responsible for shipping, insurance, and customs duties. Make sure your contract specifies the applicable Incoterms, as they significantly impact costs and responsibilities.

Not Understanding Currency Conversion

International shipping contracts often include fees that are subject to currency conversion. If the contract does not specify how currency fluctuations will be handled, you may end up paying more than anticipated. Negotiate a clear agreement on how currency adjustments will be calculated.

Underestimating Packaging Requirements

International shipments often require more robust packaging to withstand longer transit times and rougher handling. Ensure your contract includes provisions for packaging standards, or you might face increased damage rates and insurance claims.

Failure to Account for Surcharges

International shipments are subject to a variety of surcharges that may not be present in domestic shipping. Review your contract for potential surcharges, such as fuel adjustments, remote area fees, and security surcharges, which can significantly increase your shipping costs.

Disregarding Value of Landed Cost Calculator

It is important to know the tax amounts that will be applied based on the value of the merchandise. The percentage charged varies drastically by country, and when not known upfront, it could lead to abandoned shipments. Partnering with companies that provide landed cost calculators for a manageable fee often tends to provide a favorable outcome.

4. Concessions to Ask for in International Shipping Contracts

When negotiating an international shipping contract, there are several concessions you can request to reduce costs and improve service levels:

Rate Discounts

Shipping rates are often negotiable, especially if you commit to a certain volume of shipments. Ask for discounts on base rates or bulk shipment discounts. A disbursement fee is an often-overlooked cost that should be negotiated.

Waiver of Certain Surcharges

Some surcharges, such as remote area, delivery fees, fuel, or tax forwarding, may be negotiable. Request a waiver or reduction of these fees, particularly if you ship frequently to certain locations.

Improved Delivery Time Guarantees

For critical shipments, negotiate for improved delivery time guarantees with penalties for missed deadlines. This can be particularly important for perishable goods or time-sensitive materials.

Flexible Payment Terms

Negotiate for more favorable payment terms, such as extended payment periods or reduced fees for late payments. This can help with cash flow management, particularly for smaller businesses.

Customized Reporting

Ask for detailed, customized reports on your shipping activity. This can help you analyze your shipping patterns, identify cost-saving opportunities, and better manage your logistics.

Enhanced Insurance Coverage

If the standard insurance coverage offered by the carrier is insufficient, negotiate for enhanced coverage to protect against potential losses. This is especially important for high-value shipments.

5. Proposed US Import Changes

a) A new rule proposal from the Biden administration would prohibit products that are subject to US - China tariffs from being eligible for a special customs exemption.

b) The de minimis loophole allows packages with a value of less than $800 to enter the United States with relatively little scrutiny.

c) Officials say a recent explosion in the number of de minimis shipments is due largely to Chinese-linked online retail giants importing hundreds of thousands of packages to the United States daily.

6. Final Thoughts

Shipping internationally involves navigating a complex web of regulations, fees, and logistics. By thoroughly reviewing your carrier contract and understanding the key differences between domestic and international shipping, you can avoid common pitfalls and negotiate better terms. Always be proactive in asking for concessions that can save you money, such as rate discounts, waiver of surcharges, and enhanced insurance coverage.

It's also essential to stay informed about the specific requirements of the countries you are shipping to, as regulations can change frequently. By being diligent and well-prepared, you can ensure that your international shipping operations run smoothly and cost-effectively.

Chris Sheridan is a Senior Supply Chain Analyst with LJM Group. He has more than 35 years of experience in the transportation and logistics industry, including more than three decades of multidisciplinary tenure with UPS. Since 1998, LJM Group has been helping shippers improve their visibility, efficiency, and profitability with comprehensive Data Analytics, expert Parcel Contract and Rate Optimization, and Parcel Auditing Services.

This article originally appeared in the 2024 Global/Cross-Border Issue of PARCEL.