When Should You Use an Amazon Freight Forwarder? Here’s a Checklist for New Amazon Sellers
As Amazon sellers, we are conditioned to play by our strengths. Not only do they lie within our comfort zone, but they are also where we identify the largest potential for success… and for good reason! Have a knack for catching upcoming trends? Product research is most likely your wheelhouse. Have a way with words? Listing optimization is where you’ll shine.
How many of you are experts in international shipping and cargo transportation?
While it isn’t the most glamorous part of owning your own business, getting your products from the factory to the Amazon warehouse is perhaps one of the most important (and potentially complex) aspects of being an entrepreneur in 2020.
That’s why we’ve compiled some must-know information (and spoke to an actual freight forwarding expert) about the role a freight forwarding company plays in your Amazon business.
What is a Freight Forwarder?
An Amazon FBA freight forwarder is an organization that assists sellers with transporting their goods from the factory (often overseas) to Amazon distribution centers. After you have completed your product research, found a manufacturer to create your product, and budgeted for your first inventory shipment, you may think you’re ready to sell.
What many new sellers fail to realize is you still have to get your product from point A to point B. Is your factory in China? Can you afford all shipping and holding costs? What about getting through customs clearance?
A typical Amazon FBA freight forwarder may offer the following services:
- Organizing storing and shipping logistics
- Inland transportation tracking
- Export documentation preparation
- Negotiating freight charges
- Finding storage space
- Freight consolidation
- Help with insurance claims
- Customs clearance
- Short term storage
- Product inspections
Think of a freight forwarder as a “shipping agent” that handles the details of your international shipping needs, including the multiple legs of the journey your product will embark on.
New to Selling on Amazon?
He warns new FBA sellers, “International trade is crazy and mistakes in international trade can be crazy expensive.”
Having a freight forwarding company working on your behalf gives you something very few new businesses have when dealing with a complex industry like international shipping: someone holding your hand along the way.
If you don’t have someone in your corner, you may ship something out without the proper paperwork, experience delays due to inspections, ultimately resulting in your product being confiscated.
Between shipping, importing, and customs there are just too many opportunities for mistakes. A (good) Amazon FBA freight forwarder knows exactly what to expect and works day and night to save you time and money (two things in very short supply for new business owners).
Think of a freight forwarder like walking into court with a lawyer.
Is a freight forwarder required to do business on Amazon? No. But think of it this way…
When you have your supplier cover shipping logistics for you, they will just hire their own freight forwarder. You are not that freight forwarder’s client. Your supplier is their client. This means no direct connection, no building a relationship, and if something goes wrong… you have nowhere to go. Opting for your own freight forwarding service gives personalized service and a personal contact who cares about your business.
Your freight forwarder should know you and your product well.
Why Would Sellers Opt to Use an FBA Freight Forwarder?
- Cost & Connections
It’s been said that the entertainment business is a “who you know” industry. While this is not necessarily true for Amazon sellers, there is a unique value that a freight forwarding company may bring you: special relationships.
As shipping experts in an international industry with several moving parts, many freight forwarders have the ability to make arrangements (consolidate and/or negotiate) with other transportations services to help you save on costs. Putting your product in a hand-picked and trusted carrier goes a long way.
Working with an Amazon FBA freight forwarder will also help you save money on transportation rates, which are subject to change daily.
Tariff documents, shipping paperwork, customs clearance, compliance classification. Rather than piling up in an already-busy calendar of yours, let the freight forwarder use their experience and streamlined workflow to simplify these important (but headache-inducing) processes.
- Extra Services
If there’s one place you may want to be open to up-selling, it’s with your shipping logistics.You may be interested in having some of your banking paperwork taken care of or additional insurance policies to protect your products. Don’t be afraid to ask about these things when looking for the right freight forwarder.
How Much Will a Freight Forwarder Cost?
The shipping cost of your freight forwarding services will depend primarily on these three factors.
- Weight of commodity
- Volume of goods – Measured in cubic meters or “CBM.”
- Ship from/Ship to – For example, because of the distance of the shipping journey, a 100kg shipment from China to Los Angeles would be cheaper than a 100kg shipment from China to New York.
Be aware when budgeting… alcohol-based products, liquids, certain batteries, and other “dangerous goods” will most likely cost you more to ship than simple plastic products, for example.
Types of Transportation
Your freight forwarding company will be responsible for overseeing the transport of your product over vast distances. This transport takes many shapes.
Ground shipping is a common component of many Amazon sellers’ supply chain, even when using air or sea freight methods. Ground shipping is typically carried out via trailer truck or train, the latter being more common across Europe. This method of transportation is critical for navigating some of the more intricate routes between a county’s air/sea port and its closest Amazon distribution center. When shipping by land, expect to pay more than sea freight but less than air, depending on the destination country’s infrastructure.
Shipping by sea makes use of massive cargo ships (the ones with the colorful containers) to ship products by bulk. This method of shipping is often slow, but the most affordable.
If you are shipping by sea, you will want to be familiar with two methods of packing: FCL and LCL.
FCL or “full container load” refers to a shipping container containing products all from the same party. If you are shipping an FCL shipment, your products would occupy one, full container. FCL shipments have several benefits:
- Usually more affordable, as it’s easier for shipping companies to load a full container, rather than meticulously dividing one up for multiple parties.
- Since FCL containers are all unloaded at once (and from the same party), this process at the destination port is faster and potentially comes with less fees.
- Ideal for large items and bulk shipments.
LCL or “less than container load” refers to shipping containers divided up amongst multiple selling parties. If you’re worried about storage space at your own warehouse or simply want to keep your inventory lean for financial reasons, LCL shipments allow you to ship smaller volumes – you’re essentially sharing the space of the container. LCL shipments also have their own benefits:
- Best for steady inventory flow and leaner quantities
- LCL makes delivery appointments easier, by giving you more leeway/freetime at the port. This may end up saving you some money on fees.
- Best for “split shipment” – product shipments that are going to several different Amazon warehouses.
Air shipping is typically the most expensive of the three, but the fastest. FBA sellers interested in expedited shipping or shipping smaller quantities of products may be interested in air freight shipping.
When Choosing a Freight Forwarder, Don’t Forget to ask…
Do they have Amazon experience? The Amazon ecosystem is complex and still growing every day. As the largest online marketplace in the world, Amazon maintains strict shipping, packing, and storing guidelines that must be followed if you are to succeed on the platform. How long have they been working with Amazon-focused clients? In which marketplaces do they have experience? Does your freight forwarder have proper representation in your product’s country of origin (for example, a Chinese supplier) and its destination country?
Some freight forwarders are experts in shipping to certain countries… they may not always give you the best advice on protocols “outside their jurisdiction.” Have you found a great freight forwarding expert in Australia? Great. But be advised, they may not be the best choice for shipping from China to the US.
It’s crucial that your Amazon FBA freight forwarder has experience navigating these figurative waters before they can even attempt to help you navigate international ones.
Do they take care of customs clearance? This is especially important to ask if you are a non-US Amazon FBA seller. Some of you may not have an established LLC or social security number.
The freight forwarder is always responsible for customs clearance (don’t work with a freight forwarder who doesn’t do this for you, it’s part of standard service).
How much does customs clearance cost? Well, it depends on the number of shipments you’re moving per month, the terms you agree to when you sign up, and your relationship with your freight forwarding company. Typically, you will be required to pay before delivery. However, if you have established a healthy, long standing relationship with your freight forwarder, they will be more likely to give you a better deal (for example, instead of paying before delivery, they may give you 90 days after delivery to make the payment).
Do they offer insurance? Whether or not you are shipping and selling specialty products, you should confirm that your freight forwarding company offers insurance. This may be basic loss, damage cost, or something a little more tailored. Do not trust a freight forwarder that does not offer insurance.
Hope for the best, plan for the worst.
Do they offer you tailored services? Or do they offer general, templated services to all clients, no matter the product?
Fragile home decor does not ship the same as a box of phone cases. You’re going to want a freight forwarding company that understands your needs and gives you personal attention.
Freight Forwarder Documents to Know
- Bill of Lading (BOL) – This is a contract that accompanies your shipped goods, made between carrier and shipper. Your freight forwarder will issue your Bill of Lading form.
- Export license- If your supplier does not have an export license, your freight forwarder will have to issue one. As the client, you will never see your export license, however your freight forwarder needs it to export from China.
- Inspection certificate- Commodity based for more specialized products.
- Commercial invoice- A commercial invoice is used for export (showing China what exactly you’re exporting and for showing your destination country what you plan to import (contents, quantity, value). You will receive a commercial invoice from your supplier.
- Packing list- Discloses number of boxes, units per box, pallets/no pallets, etc. You will also get this from your supplier.
- Special certificates – Special documentation will be required if you are shipping children products, medical devices, or anything with soil/seeds that require USDA approval.
- Entry summary– This is a document you receive from US customs after you pay your import duty. An entry summary shows the value of goods declared to customs and maintains shipment records. Your freight forwarder will give an entry summary to you after your shipment has cleared customs in the US.
- Proof of Delivery (POD) – Once the delivery order is signed by the appropriate personnel at its destination, your freight forwarder will give you a Proof of Delivery document to verify its completed journey.
What is Amazon’s Inventory Placement Service?
Amazon determines which distribution centers they want to ship the products to, they make the rules (no surprise there). Once your products reach their destination country (for many of you this will be the US), Amazon distributes your products to various warehouses around the country. Now instead of one shipment, you must manage multiple shipments. This will raise your price considerably.
With IPS or Amazon’s Inventory Placement Service (found in your seller central shipping options), Amazon will send your FBA shipment to a single receiving center to be distributed later. Now you only have to manage a single shipment. This Inventory Placement Service charges you per unit (depending on size), starting at $0.30 per unit.
Check your IPS costs before you select this option to make sure you can afford Inventory Placement Services. To learn more about Amazon Inventory Placement Services and product exceptions, read up on Amazon’s policy here.
Don’t Tempt Freight Alone
At the end of the day, shipping is a problem solving business.
Refael offers a sobering picture of life without a freight forwarder fighting by your side:
“Truck drivers, port authorities, shipping vessels… all in China. Port delays, container unloading, customs compliance, trucks to a warehouse, more trucks for delivery… all in your destination country. There are so many hands on your product and so many parties involved.
It’s actually very rare that something doesn’t go wrong along the way.”
If a fully optimized supply chain, efficient transport schedule, and consolidated shipping plan don’t get you excited to start selling your product, I have one reason that may help. All of these things save you a ton of money in the *international* long haul.
A special thanks to Refael Elbaz and Unicargo for sharing their expertise!