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The maths of shipping from China

Updated on June 5, 2016

Shipping from China

So, you reckon you have bought your items at a bargain. Good. Now this is where the real stuff goes down.

If you are a reseller, you are looking to keep your costs to a minimum. If you have an item, trust me, you are not the only one. You find that many a time you fight for customers on the basis of price, usually a small differential between you and the next guy.

For this reason, shipping costs are super important. That, and time/timing. It is pointless to bring an item by snail-shipping and your competitor brings it faster..steals your thunder :(

So the balance is crucial between cost saving and time saving.

As a rule of thumb, bulky items are shipped by sea. Smaller items by air.

Normal airfreight refers to anything above 45kg. For packages below 45kg, most forwarders will advise you to bring by courier. The DHL, ARAMEX, FEDEX, UPS of this world.

Recently there is a new method of shipping where some forwarders consolidate your goods together with others for a minimum of 13kg at a rate of $8.00/kg or a minimum flat figure of $100.00 This flat figure means that regardless of the fact that your shipment could weigh 3kg you must pay $100.00.

Now using 'normal' airfreight & sea freight (LCL) methods vs using consolidating agents (the chaps in Eastleigh, Mombasa etc)

Consolidating agents (All expenses paid, collection from warehouse)

  • Airfreight rates 8.00/kg.
  • Seafreight rates Kshs 26,000/cbm or $270.00 at current exchange rates

'Normal airfreight/Shipping rates

  • Airfreight rates from China $6.5/kg
  • Seafreight rates $210.00/CBM

So, what to do, to do......

With normal airfreight, you get to choose how fast your consignment arrives. Meaning that you do not have to wait until all goods headed to Kenya are consolidated.

However, you must then sort out customs, agency & port charges yourself.

Customs charges include 25% import tax, 16% VAT (can claim it back if registered), 2.5 % IDF(minimum of Kshs 5,000), 3% rail levy, Inspection fees, miscellaneous 1%, Agency fee (minimum Kshs 10,000). Basically, take the FOB value of your goods and multiply by approx 0.55 to get an idea of the additional money you will need to fork out. For sea freight, you multiply by CIF (cost insurance freight) value.

Yes, the above looks tedious. But if you have a good clearing agent it is pretty straight forward and within 3 days, all things constant, your goods will be released from the port. Remember that you can claim back the 16% VAT.

Value of your goods is real important in the above calculation.

Scenario 1.

1. Your goods are valued at $500 and weigh 23kg and you are using air freight.

Using the consolidating agents (charges based on weight only), your costs will be 23*8=$184. This is the only amount you will pay apart from what you paid your supplier.

2. Using normal airfreight, you will pay freight 23*$6.50 + duty $500*0.55= 424.50. VAT that you will claim back is roughly $100.00.

Scenario 2

Goods valued at $200 and weight is 23kg

1. Using consolidating agents, you will pay 23*8 as you pay a flat rate of $8.00/kg= $184.00

2. Using normal airfreight. 23*$6.5 + $200*0.55= $259.50 Claim back $40.00 as VAT.

So the gap reduces.

The implications?

If your goods are of low value and weight, consider bringing them by normal airfreight. Sometimes you can negotiate for a rate as low as $5.00 if you do business with the big shipping companies based in China. Not brokers.

If you do not want the hassles and are prepared to wait for your shipment to be consolidated with others, you may use the consolidating companies.

Do the maths.




Summary of Charges Payable at the Port for Imported Goods- Kenya

IMPORT DUTY
25%
 
VAT
16%
 
IDF
2.5% OR Kshs 5,000
 
RAIL DEV.LEVY
3%
 
MISCELLANOUS- break bulk, port charges
1%
 
CLEARING AGENT
1% or Kshs 10,000 - whicever is higher
 
 
 
 
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© 2016 Anne Gathoni

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