Your Air Freight Questions Answered–The Operations Edition (Part 2)

Your Air Freight Questions Answered – The Operations Edition

air freight When you’ve been in the air freight business as long as we have (Established 1977 – thank you very much) you encounter nearly every scenario possible where it comes to moving goods by air. We once saw an air freight shipment of a mast for a sail boat that was so long it had to be loaded by popping out the cockpit windows, sliding in the mast and then securing it for flight. The question most asked after hearing that story is “how did they fly the plane with open cockpit windows?”. They didn’t. The windows were removed for loading, then put back in so that the plane could actually fly. The point is that for every air freight scenario that comes up, we get a lot of questions. Many of them are good ones, and so we’ve chosen some of the better ones, the ones that actually relate to problems our shippers have or that they struggle to understand. Our most recent post of air freight questions focused on air freight economics and pricing. This time we’re answering questions about air freight operations that have an effect on your shipments:

Q: Why is it so hard to just “get another carrier” or “change airlines” when a shipment gets delayed or stuck?

A: This is a great question and we get a lot of calls from shippers who say “another forwarder got my freight delayed in Hong Kong, which is such a big airport, but now they can’t move it onwards. Can’t you just switch it to another airline?”.
The answer is “no” and there are some very logical reasons for it. To begin with, it’s important to realize that general cargo, unlike “self loading cargo” a/k/a passengers, can’t simply walk over to a ticket counter, present documents and a credit card and be transferred to a new airline. Despite being a highly dynamic product, air freight is built on some fairly rigid processes and as a result once a shipment begins its journey under an airway bill assigned to a specific freight forwarder, no one can control that shipment except the airline and freight forwarder who issued it. The ground handling companies who actually move the cargo at airports work exclusively for the airlines; the pricing of the shipment is strictly between the forwarder and the airline; and while the cargo is in transit it stays in secured, bonded areas where no one can reach it other than the ground handlers. That secure and bonded status extends to the legal status of the goods in transit as well, meaning no local forwarder or alternate airline can step in and take over the goods per local customs and international trade procedures. The best example we give customers is to think of cargo as passenger baggage. Once it misses a connection in London, there may be countless other flights available, but the airline who checked in the baggage is the one who has to get it to final destination. Even if another carrier is used, this can only be arranged and controlled by the initial airline with whom the baggage/cargo was checked in. This same constraint, however, becomes a way for us to add value to our clients air freight spend. By using our “direct or faster” approach to air freight, we at Crescent Air Freight rely primarily on direct flights for the transit of our customer’s goods. Our logic is simple here as we believe fewer stops, transfers and layovers eliminate the potential for delays, damages or misrouted goods. We take delays especially seriously since our customers are paying for speed when they choose air and very often every single transit day matters. So, while we might get a cheaper rate flying from New York to London via Frankfurt, we also know that we’re adding on 2-3 days of extra transit time and very few of our customers want this. Then comes the “…or faster” consideration. There are many instances when no direct flight option exists, or very often an indirect carrier will have more flights into a specific city or country than a direct carrier offers. This is very common for some extremely important markets like Africa, Central Asia and the Indian Subcontinent. Cargo destined for countries in these regions often arrives at destination faster when flown on an indirect carrier via Amsterdam, Brussels, Dubai, Frankfurt or Paris.

It sounds simple, but this is an important calculation that every freight forwarder needs to make when choosing how to route a shipment. The key consideration always should be: “what’s the best value for the money a client spends?

Q:  Why do air freight forwarders focus so much on cargo dimensions

A: We get this one so often, and despite answering it for customers repeatedly, they still express irritation over it. Let’s get a couple of things clarified about this matter up front:

a. The vast majority of aircraft in the world are passenger aircraft. According to Boeing’s “Current Market Outlook 2013-2032” approximately 2,300 of those planes are large and medium wide body jets which have the capacity to carry large cargo loads (you can think of this is cargo built onto pallets – whereas narrow body jets are better suited to small packages and hand loaded cargo)

b. On wide body passenger aircraft, freight cannot exceed 64 inches in height. If a piece of cargo is 64.25 inches in height it will collide with the passenger deck. So, here’s your first problem. The height of cargo is critical in determining what aircraft is to be used and since there’s a greater supply of passenger aircraft than freighter aircraft, simple economics dictates that you will likely pay more if your cargo can’t fit on a passenger flight.

c. Then there’s the matter of limited capacity on a plane. Most airline pallets are 20’ long. If cargo exceeds 20’ in length it overlaps the pallet and potentially makes the entire neighboring pallet unusable. This costs airlines money as they cannot access capacity in a cargo hold that is already short on space.

d. Even if your cargo doesn’t overhang, there’s still a significant penalty for having cargo that doesn’t allow the airline to maximize the tonnage capacity of their aircraft. This is a concept known as density and it implies that the airline loses money for transporting goods that weigh less than the aircraft cargo’s payload but occupy the same amount of space.

e. The density calculation most relevant to air cargo is that of volume:

(Length x Width x Height) x # of Pieces = volume weight in pounds
166

Or

(Length x Width x Height) x # of Pieces = volume weight in kilograms
366

The airline calculates air freight charges on the higher of the volume weight or the gross weight. This is a standard industry convention and really isn’t negotiable, so don’t think that your freight forwarder is playing tricks on you. As a shipper you should be well aware of the density or lack thereof of your cargo. Shippers of goods like telecommunications equipment, networking gear, plastic goods, and automotive accessories are especially likely to pay for volume. Meanwhile shippers of cheese, metal, lumber, and liquids never really have to worry about volume as their cargo is far too dense.
So, the answer to these question is an economic one. Knowing your dimensions can make a tremendous difference in your air freight costs which ultimately impacts profitability.

There’s a good deal more than just “buying” and “selling” that goes into an air freight shipment. As far as operations are concerned, a client’s orders to “just get it there” require a lot of planning and expertise. Having four decades of experience makes Crescent Air Freight uniquely well suited to understanding the complexities that come with international logistics and to creating solutions that make the process easy and cost effective for our clients. We look forward to your questions and comments, and best of all, you don’t have to be a customer to ask a question. Just send a Tweet @CrescentAF or email us at cargo@crescent1.com and we’ll be happy to answer your questions any time.

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Your Air Freight Questions Answered – Part 1

Your Air Freight Questions Answered

Loading air freightHere at the Exporting Excellence™ blog we invest a great deal of time in answering questions about international air freight for our clients.  What we find most interesting is the fact that these questions don’t just come from small or mid-sized customers, but even from Fortune 500 sized shippers who have large air freight volumes.  One of the most important ways we at Crescent Air Freight add value to the business of our clients is by eliminating the complexities that come with international logistics.  To that extent, we’ve put together a series of FAQ’s that we have encountered from shippers of all sizes and from across various industries.  Here’s a selection of some of the more frequent questions and our answers:

Q:             Why does air freight cost so much? 

A:              The answer lies in simple economics: there is a scarcity of space on an aircraft.  Long range, wide body passenger aircraft typically carry 15 – 20 tons of cargo on a flight and that’s only if passenger baggage and fuel capacity allow for it.  On top of that, since cargo on a passenger flight goes in the aircraft belly, the maximum allowable height of the freight is only 64 inches.

With freighter aircraft, the maximum payloads are about 100 – 110 tons per flight, and maximum heights can go up to 108 inches (sometimes more depending upon the contour of the aircraft and the cargo).  Contrast this with a 20’ ocean shipping container which can accommodate a payload of more than 20 tons, and you begin to see why space is always at a premium on an aircraft.

Q:             Are there any ways to reduce or offset the costs of air freight, without settling for an ocean freight transit time?

A:              We get this question very often, and there are several ways to answer it.

To begin with, the economics we mentioned above can’t be totally ignored.  Space on an aircraft always comes at a premium.  Typically direct flights and non-stop flights justify a higher price because of the speed of transit and reduced potential for delays.  Hence, one cost saving solution shippers can opt for is an indirect service, which typically involves a slightly longer transit for a slightly lower price.  As an example, cargo flying from New York to Sydney, Australia on a direct flight with QANTAS moves at nearly double the cost per kilogram of the same shipment traveling on Qatar Airways via Doha, using 2 flights.  This may seem odd to the consumer: 1 flight ought to be cheaper to operate and load versus 2 flights and a longer route.  However, the carrier offering direct service justifies their price premium by getting cargo directly to destination in a shorter time frame.  The indirect carrier justifies their discount by pulling in cargo from all their destinations into a single freight hub and profiting from the potentially greater volume (in theory, anyways).

What new shippers typically fail to understand is that the cost cannot be continuously decreased by increasing the transit time.  So this creates a common follow up question such as “Can you give us a really slow service that takes 7-10 days maybe for a really low price?”.  This is something that really doesn’t exist, and if a huge price discount is to be found it’s probably because the airline has no traffic going to a particular destination and hence markets the space more aggressively, rather than pricing the service based on transit times.

There are, however, some scenarios where we are able to get creative with the mode of transport by adopting a multi-modal solution.  For example, cargo being routed to landlocked countries in Central Africa, Central Asia or Central Europe can be sailed to major nearby cargo hubs such as Abidjan, Bremerhaven, Dubai or Sharjah and then flown or trucked a short distance to countries of final destination such as Afghanistan, Mali, Switzerland, etc.  This sharply reduces the total landed cost of product at destination and also improves transit time over a pure ocean service.  We offer similar solutions for our customers in the garment and textile industry by sailing cargo from Bangladesh to Dubai and then flying the goods to the United States, thus taking advantage of low inbound air freight rates and ample capacity that is typically not available in the country of origin of the goods.  Sometimes the opposite works too as cargo can be flown from a landlocked country such as Nepal, into a major nearby port city and then transferred to ocean containers for final transit to Europe or the United States.

The ultimate way to avoid air freight costs, of course, is to not ship via air at all, and for customers who do not ship enough material to fill an ocean container on their own, the option of LCL ocean freight exists.  Of course this is a longer transit time service than even standard containerized ocean freight, but the cost is often justifiable.

All of these scenarios, however, do require planning and that’s really the most important thing for a logistics manager to realize.  Planning with your service provider and sharing information on required transit times, budget constraints, deadlines at origin or destination, etc. will allow your freight forwarder to come up with the right solution for your business and even for your individual shipment.  “Just get it there” doesn’t work and is akin to randomly pulling a suit off a department store rack and telling the tailor to “just make it fit”.

Q:             Do we really need to pay for a premium or time defined/guaranteed service?  Can’t you just use your influence with the airlines to make our cargo move faster? 

A:              Definitely, maybe…

This question comes up a lot and many times the part about using “your influence with the airlines…” can come across as more of a taunt than a request!  The reality is that just like in many other businesses, with air freight (and logistics in general), you get what you pay for.  If your cargo needs to be kept in a cooler between flights and upon arrival at destination, then a freight forwarder will usually get you a service that may be slightly more expensive than general cargo, but far less than the cost of leasing a refrigerated air freight container.  The airline would want you to lease the refrigerated container and maybe even pay them round trip airfare for it, but your forwarder adds tremendous value here by providing you a “product appropriate”, cost effective service option based on their knowledge of your product, temperature requirements and by proposing reasonable alternatives.  However, once again the key here is communication.  If a shipper fails to disclose their true temperature or handling requirements for the sake of saving money and the goods suffer damage as a result, then there’s nothing a forwarder can do, especially after the shipment has been executed.

Temperature controlled goods present a truly special case as do high value goods and a few other select product categories.  Other times shippers have general cargo to ship via air on a very tight deadline.  In such circumstances time definite or guaranteed services are worthwhile.  The cost may be triple that of regular air freight, but if a customer is facing a production shut down, or an inventory problem that must be solved in a short time frame then it’s obviously worthwhile.

Over the past 39 years we have accumulated a lot of questions about the air freight and logistics process in general. In fact we just focused on price issues in this post and next month we’ll focus on air freight service and operational questions that arise on a daily basis.  In order to make the series work for you, we suggest you leave your questions in the comments below, or if you prefer, try sending us your questions by email at cargo@crescent1.com or on Twitter at @CrescentAF.

 

Amazon Gets Set to Disrupt the Freight Forwarding Market

Amazon Gets Set to Disrupt the Freight Forwarding Market

amazonAfter building an enviable fulfillment process and network, acquiring trailers to transport goods between fulfillment and sortation centers, dabbling in its own delivery services and dipping its toes in air cargo, Amazon is now eyeing the ocean freight forwarding market. 

Should other freight forwarders be concerned?

Freight forwarders are already facing a difficult market thanks to overcapacity, declining rates and a global economy that has remained in the doldrums for several years. However, as Amazon enters the NVOCC realm, there are bells going off in many freight forwarding offices.

Amazon is a monster e-commerce provider, an IT firm and a logistics provider. It is also a major customer of such delivery companies as FedEx, UPS and the USPS. In fact, according to some publications, Amazon is a $1 billion customer for UPS alone. $1 billion in transportation spend with UPS alone – that’s perhaps the main reason for building out its logistics and transportation network – costs are soaring – and so Amazon apparently has decided to bring it all in-house.

increase your airfreight revenuesDespite the precarious industry headwinds facing freight forwarders, Amazon’s NVOCC registry from the FMC depicts its Asian ambitions.  Amazon’s official name on the FMC’s NVOCC registry is Beijing Century JOYO Courier Service Co. Ltd. JOYO was a Chinese e-retailer acquired by Amazon in 2004 and also marked Amazon’s entry into China.

According to industry speculation, Amazon could provide freight forwarding services to Chinese companies looking to export products directly into its Fulfillment by Amazon (FBA) warehouses, or perhaps even “cross-dock” the goods to inject into Amazon’s US delivery network. In addition, Amazon could provide a service most other freight forwarders are unable to – limiting the number of cargo ‘handoffs’ within the supply chain as well as fully taking advantage of its strong IT capabilities to further automate the process.

Amazon will come up against stiff competition. Alibaba, China’s own monster e-commerce provider, IT firm and coordinator of logistics services, signed an agreement with China Shipping Group, its subsidiary, China Shipping Network Technology and sister company China Shipping Container Lines in 2014 to set up an integrated and cross-border logistics platform. The platform will allow for both China Shipping’s and Alibaba’s clients to use it for price inquiry, ordering, tracking and settlement.

The race is on between the world’s two largest e-commerce providers and logistics is where the competition will ultimately determine the winner and perhaps redefine a freight forwarding market in need of change.

The World Needed Another Article on Amazon’s Dominance?

We actually put this article together for a very different reason than to just comment on Amazon.  At Crescent Air Freight we are not only a freight forwarder and NVOCC, but we’re also a consolidator which means we do business with other freight companies.  Many of our industry customers are ocean freight forwarders, NVOCC’s and customs brokers who don’t have in house air freight capabilities.  In other cases we’ll work with freight forwarders who may be licensed for air freight shipping but simply don’t have access to the pricing that we do.  So in that respect, we see some significant value in what Amazon could bring to the logistics marketplace.

Here’s an example of how we cooperate with industry competitors and how Amazon could do the same:

unlock the airfreight business in your customer baseWe have an NVOCC client who has no air freight capability, but they have tremendous ocean freight volume from various U.S. exporters.  A small percentage of the business that their customers have requires air freight service, and our client was simply letting that traffic walk out the door as they were unable to service it themselves.  Crescent was able to put together a simple set of rate and booking procedures that effectively made us the outsourced air freight vendor for this client.  As a result they are now able to capture over $50,000 in annual net revenue from this activity alone.

Now imagine Amazon’s volume of container traffic from China to the United States alone.  By choosing to become an NVOCC instead of a BCO (Beneficial Cargo Owner), Amazon is clearly signaling that they intend to make money off the sale of ocean freight services.  So imagine, just as a consumer goes to the Amazon Marketplace and chooses from 10 different vendors of the Apple iPhone, your freight business can now get centralized access to 1 set of prices for containers from Shanghai to Long Beach (for example).  No more price fluctuations, no more bloated destination charges from multiple handling agents and warehouses, etc.  Just one simple price.  That’s the power of what Amazon’s entry can mean to the market for U.S. import logistics.

Freight forwarders will be mistaken to see this as competition.  Amazon has repeatedly shown that “coopetition” with small businesses and other vendors – including those who sell competing products – is integral to their business model.  We believe they’re going to harness their considerable buying power in the freight markets to do the same for container shipping from Asia to the United States.  And this is no small undertaking – Far East Asia supplies over 50% of U.S. imports!  Clearly Amazon sees vast potential to deliver savings and take a cut for itself.  So how is this not competition for forwarders?  Well, in simple buying & selling terms it has to be considered competition.  However, in terms of value added services, it’s actually going to be a benefit to freight forwarders and NVOCC’s.  Considering most forwarders, especially small to mid-sized ones, deliver unsurpassed service benefits to their clients that large forwarders and integrators don’t, the actual cost of freight is nowhere nearly as significant as one might think.  If you’re a small or mid-sized forwarder who continues to add value to your customer’s business, then Amazon is about to drive down costs and stabilize them for your benefit as well as for the benefit of your customers.  If you’re a freight forwarder who currently does not service China origin business, Amazon may just give you a chance to capture business you’ve been neglecting due to lack of access or in house capabilities in the way that we did for our NVOCC customer.

So we say, “Welcome Amazon”.  It’s going to be fun competing with you and growing with you.

grow your air freight business today

Saudi Arabia – Not Just for Oil

oil fieldsSaudi Arabia – Not Just for Oil

When one thinks of Saudi Arabia and international trade, oil typically comes to mind first, but times are changing. The price of oil has been on the decline over the past couple of years and as such Saudi Arabia has been diversifying its economy. As a result, opportunities exist for exporters.

Saudi Arabia is the 19th largest exporter and the 20th largest import market in the world. Among the top exports is of course, oil, but also plastics, metal goods, construction materials and electrical appliances. In terms of imports, the country’s leading commodities are vehicles, machinery, electronic equipment and pharmaceuticals. U.S. exporters of these products have found Saudi Arabia to be an excellent market for decades.

Trade Lanes

Diversification and Infrastructure

Diversification is important for Saudi Arabia in order to grow its economy and as such government investments in infrastructure and non-oil industries are on the rise. Not surprising, the construction sector is the largest driver of economic activity in Saudi Arabia after oil particularly as government-sponsored projects such as hospitals, specific industry-related economic hubs and infrastructure are driving most of this need.

Indeed, ambitious infrastructure projects are underway with five rail projects to connect not only the major cities within the country but also to serve as a link between the Red Sea and the Persian Gulf as well as with the six other countries of the Gulf Cooperation Council (GCC). This is an interesting development for many reasons, as the Arabia Peninsula is one of the only regions of the world that jumped to modern air and ocean ports infra structure without first developing a rail network. For U.S. exporters, especially those shipping to major inland points such as Riyadh (the nation’s capital), the presence of rail cargo could lower the cost of inland delivery substantially and increase delivery times.

Expansion plans are also underway at airports in Riyadh, Jeddah, Madinah, Nijran, and Tabuk primarily for passengers but will undoubtedly benefit cargo also.

Furthermore, ocean port projects include expansion of the country’s largest port in Jeddah, as well as improvements to ports in Jazan, Al-Madhaya and Fursan. Inland ports are also being built in specific industry-related economic hubs known as Economic Cities.

Along with infrastructure investments, Saudi Arabia has identified several industries for further development such as healthcare, life sciences, automotive, information technology, logistics, alternative energy and manufacturing.

Because of the high volume of imported automobiles and automobile parts, there are particularly high expectations to expand the domestic automobile manufacturing industry. Currently there is local production of light trucks only on a small scale by Isuzu, Daimler, Volvo and MAN. Tata, Jaguar and Land Rover are considering local assembly operations in Saudi Arabia.

In addition, Saudi Arabia is the world’s largest importer of defense equipment and as a result, the government is also working towards developing a manufacturing base for weapons parts and components.

Trade

The Department of Customs at the Ministry of Finance oversees all merchandise moving through Saudi customs ports. In addition, the Saudi Food and Drug Authority (SFDA) are empowered by the Saudi Council of Ministers to have a representative at eight Saudi ports of entry with Saudi Custom officials to regulate and control the entry of medical devices. As such, medical devices are only allowed entry into Saudi Arabia through the three major international airports, two seaports in Jeddah and Dammam, and three land entry points.

On the global front, Saudi Arabia joined the World Trade Organization (WTO) in 2005 and as part of this trade organization is committed to its rules including transparency in trade requirements and more accommodating to non-Saudi businesses. Being a WTO member, Saudi Arabia is expected to bind its tariffs on over three fourths of U.S. exports of industrial goods at an average rate of 3.2%, while tariffs on over 90% of agricultural products are set at 15% or lower.

Additionally, as a member of the Gulf Cooperation Council (GCC), Saudi Arabia applies an external tariff of 5% for most products, with a limited number of GCC-approved country-specific exceptions.

Despite being a member of WTO, Saudi Arabia still favors Saudi businesses. In addition, there are also concerns of counterfeit products. In some consumer goods, for example, it is estimated that as much as 50% of the entire Saudi market is counterfeit. In order to restrict the entry of counterfeit products, the Saudi Customs Authority now requires all imported goods to clearly display the “Country of Origin” or “Made in ….” on items in an irremovable manner.

So, Saudi Arabia is much more than oil. True, oil still remains a leading export commodity but the country is working hard to diversify from its dependence and as such suppliers of numerous industries such as automotive, pharmaceutical, consumer goods and manufacturing should benefit as this country opens its doors further to global trade.

IoT In the Logistics Space

IoT In the Logistics Space.

IoTEvery once in a while the logistics business gets to be “cool”. We’re not using a tired old pun here about the “cool chain” or perishable transportation solutions. Instead, we’re excited at the moment by the phenomenon known as the “Internet of Things” or IoT. As we’ve shown in some previous posts here at the Exporting Excellence™ blog we really like data and how it can be applied to (or derived from) international business, and IoT is all about the data.  From tracking passenger baggage to initiating preventative maintenance orders on aircraft, IoT is having a profound impact on the field of logistics and there are several ways that your business can benefit from this trend.

As we had mentioned in our post on big data, routine business processes create a great deal of data. This is primarily a byproduct of the increase in digital and online business processes – quite simply, every click we make in a browser, app or other program generates a data point that gets recorded somewhere, somehow. Big Data essentially focuses on how to compile, sort and interpret such data. IoT on the other hand is more concerned with how to “make” more data by bringing devices and gadgets that were previously inanimate and silent to “life” using network and digital communications. The result of compiling all this extra data is to enable businesses to use their resources more efficiently which in turn can increase sales, profitability, or other key business performance attributes.

We were really impressed with this recent report published by Deloitte University (part of accounting and consulting giant Deloitte Touche Homatsu) that offers some great insights into how IoT has been successfully adopted into supply chain and logistics processes as well as the many opportunities that it offers.

So what is the opportunity that IoT brings to the freight business? At the moment, most of the attention is focused on tracking cargo. The ability for an importer to determine how far from port their material sits, for example, seems to hold value for major wholesalers and retailers. Some specialized applications such as temperature monitoring for perishables and transit time tracking for pharmaceuticals seem to be gaining traction as well. A recent example of IoT technology hard at work that we came across was in the logistics of beer kegs. Already a high value segment of the logistics business, IoT is now enabling beer distributors to know how much beer actually remains in a keg. This information actually allows a bar to waste less beer (and more importantly increase yield per keg) and at the same time allows distributors to plan deliveries more efficiently. The “pre-IoT” way of measuring the amount of beer in a keg was to physically tilt it and see how heavy or light the keg was. New kegs, equipped with sensors and IoT technology can actually report the accurate quantity thereby enabling a more efficient supply and utilization process. It’s a product called iKeg from SteadyServe and you can learn more about the concept from this Wall Street Journal blog post or the company’s website. 

All of us in the logistics industry need to embrace our moment of “cool.” There is no need to expound on the many, many ways the internet has changed the world around us … we feel it everywhere. The logistics industry has lagged a bit in technological advancement because we are still a hands on, deliverable operation. It’s easy to leave the “cool” internet technology to those businesses that don’t have so many moving, physical parts. With IoT we are getting a chance to pull the technology available everywhere else, into our business. If IoT can make us operate smoother, track shipments easier, regulate temps better on perishable cargo….. what isn’t “cool” about that? And really, is anything “cooler” than increased profitability and efficiency derived from your supply chain?

 

 

Top 7 Markets for U.S. Paint & Coatings Manufacturers

Top 7 Markets for U.S. Paint & Coatings Manufacturers

Why are we looking at paint you ask?  From the logistics perspective it’s a very interesting commodity actually.  To begin with, it’s liquid and hence dense.  Density is a crucial element in the logistics planning and handling process.  As we explained in this prior post, density has a direct impact on total landed cost.

Crescent Paint ImageAnother matter of interest for us at Crescent Air Freight is the fact that paints are almost always classified as hazardous materials which is something that requires special handling and attention.  Despite a standard set of international regulations, no two airlines handle the acceptance and transport of hazardous commodities in the same way, hence we’re always on our toes as we help our clients plan their export processes for paints. 

Lastly, paint is a product that crosses industry lines.  We ship it as a raw material for our automotive customers.  We also handle coatings for our clients who deal in various manufacturing industries such as boat building, construction materials and sometimes even foods.  Yes, foods!  Now there’s no paint in your food supply, but there are coatings and one such example is shellac.  Food grade shellac is what makes your kids candy shiny.  Without it, candy would be a lot less appealing to look at.  Meanwhile, it’s also a flammable liquid and hence hazardous. 

So plain old paint meets the needs of a lot of different industries and hence we felt it was important to take a look at this commodity and its value overseas.  Accordingly then, here are the top 7 markets for paints and coating as defined by the U.S. Department of Commerce’s statistics for 2014. 

 

  1. Canada – 2014 U.S. Exports of Paint & Coatings – $1,106,629,000.00

The logistics of shipping paint to Canada is rather simple since the overwhelming majority of shipments travel over the road.  U.S. exporters would do well to look at this market for its size and ease of trade and transport procedures. 

 

  1. Mexico – 2014 U.S. Exports of Paint & Coatings – $595,175,000.00

2nd place by a wide margin, but nothing to sneeze at, Mexico offers many of the exact same benefits as Canada.  Cross border trucking eliminates many of the logistics hassles that come with air and ocean freight transport.  Meanwhile, with industries as diverse as construction and automotive manufacturing, Mexico offers strong demand for U.S. made paints & coatings. 

 

  1. China – 2014 U.S. Exports of Paint & Coatings – $126,153,000.00

A country with an industrial base the size of China’s is going to consume a lot of raw materials.  Coatings and paints fit well here, especially where it comes to high end/high value products.  Exporters, however, need to be careful with logistics compliance as this market requires shipping by air or ocean freight and each of those modes has separate and unrelated procedures for compliance in both the U.S. and in China. 

 CTA

  1. United Kingdom – 2014 U.S. Exports of Paint & Coatings – $56,708,000.00

America’s biggest overseas export market, unsurprisingly, demands a lot of U.S. made paint & coating material.  Trade regulations are easy with the UK and hazardous materials shipping regulations are straightforward, meaning U.S. exporters can confidently add this market to their export business mix without worries over hazmat rejections, documentation errors and discrepancies, etc. 

 

  1. Japan – 2014 U.S. Exports of Paint & Coatings – $52,437,000.00

A popular destination for this commodity is Far East Asia.  Japan is the 2nd biggest Asian market for U.S. made paints and coatings.  Trade policies are generally stable, but the costs associated with shipping hazardous materials to Japan are often higher than other markets.  U.S. exporters should pay close attention to the landed cost of their goods when researching sales opportunities in Japan. 

 

  1. South Korea – 2014 U.S. Exports of Paint & Coatings – $45,850,000.00

Another vital Asian market offers U.S. exporters of paints and coatings great opportunities.  South Korea does have some logistics policies that can add on costs, especially when shipping by air.  For example, cargo arriving in Incheon Airport (Seoul) over the weekend accrues greater amounts of airport storage than cargo arriving on weekdays.  Also, costs of domestic trucking and handling of hazardous materials can carry significant premiums which can directly affect export order profitability. 

 

  1. Taiwan – 2014 U.S. Exports of Paint & Coatings – $42,118,000.00

Much like China, Taiwan’s industrial base has strong demand for high end inputs including paints and raw materials.  U.S. exporters will find Taiwan to be a good market in terms of size and trade policies.  However, shipping hazardous materials to Taiwan by air can be difficult.  The main airlines serving Taiwan often impose high premiums for flying such cargo, and on top of that we’ve even seen circumstances where cargo has been offloaded per pilot’s instructions despite proper compliance with regulations on the part of shippers and their freight forwarders.

 

In addition to these markets, there are terrific overseas export opportunities in countries such as Germany, Brazil, Australia and India to name a few.  At Crescent Air Freight, we have handled the needs of paint and other hazmat shippers for nearly 4 decades.  It takes experience to navigate the complexities of such international shipping transactions and we look forward to putting our capabilities to work for your export business. 

 NEW INCOterms CTAContainer Info & Spec Sheet

 

Exporting to Nigeria

Exporting to Nigeria

As part of our ongoing series of reports on the MINT countries, we turn our attention this month to Nigeria.  Along with Mexico, Indonesia and Turkey, Nigeria stands out as an economy offering strong growth rates and an increasingly favorable environment for trade and foreign investment. 

 NigeriaGraphic

Due to the recent updating of economic statistics, Nigeria now claims to have the largest economy in Africa with a GDP of US$504 billion.  What makes this adjustment in statistics significant, for U.S. exporters in particular, is the fact that Nigeria’s oil industry is no longer as dominant a sector of the economy as it once was.  Under old economic data, it was estimated that the oil industry accounted for 33% of the economy, whereas new data suggests that only 14% of the country’s GDP is derived from oil.  As a result, the Nigerian market offers a more diverse set of opportunities to American exporters.   

 

Despite the changes in economic output, Nigeria remains a challenging place to do business and in this report we highlight some of those issues and the impact they may have on U.S. exporters. 

 CTA

With a population of 170 million, Nigeria is the most populous nation in Africa.  Its recent growth has been derived from the services and international trade sectors.  Areas that offer strong growth opportunity for U.S. exports include the following:

 

Logistics and Trade Environment

 

Like most countries in Africa, Nigeria lacks good transportation infrastructure.  The impact on U.S. exporters can be observed in many ways:

 

  1. Nigerian airports are generally not well connected to the rest of the world.  Lagos, which is Nigeria’s largest city and commercial hub, is serviced by many foreign airlines, however frequency and number of carriers remains insufficient for the needs of the country.  As a result, U.S. exporters who rely on air freight should expect to incur substantially higher freight costs than they would for delivery to other equidistant export markets. 

 

  1. Nigeria’s ocean ports have long been considered an impediment to Nigeria’s international trade.  As a result, U.S. exporters can expect to incur high costs of container shipping which can have a significant impact on export order profitability.  In recent years, however, the government has committed to investing in new ports, and as a result progress has been made over the past decade.

 

  1. Nigeria relies heavily on trucking, but simultaneously suffers from poor road infrastructure.  As a result trucking and inland delivery costs are high as it can be difficult to reach final destinations that are away from the major cities or ocean ports.  Absence of a properly functioning rail system only compounds the problem as there is no means to achieve economies of scale with respect to ocean container transport inside the country.  Considering the difficulties associated with inland transportation in Nigeria, it is highly advisable for U.S. companies to ship on a door-to-(air)port basis, thereby leaving local customs clearance and delivery arrangements to the actual importer/end user inside Nigeria. 

 

  1. Customs regulations – Nigerian Customs have long been acknowledged as a barrier to trade.     U.S. exporters should take precautions to ensure that information on commercial documents such as commercial invoices, packing lists and bills of lading are accurate and consistent.  Discrepancies can cause Nigerian authorities to delay clearance of cargo upon arrival and can even result in confiscation of merchandise.  As a result exporters can face losses or reduced profitability in their export sales. 

 

Nigerian customs duties can be as high as 30% of CIF value of merchandise and in special cases can even run as high as 100% as is the case with cigarettes for example.  U.S. exporters must be aware of this as it has a significant impact on landed cost of goods and can significantly impact the viability of export sales to Nigeria. 

 

Imports into Nigeria follow a system of prepaid duty collection whereby Nigerian importers are required to electronically file details of their import shipment and prepay customs duties to a bank which in turn will forward the duty to Nigerian customs.  Nigerian importers will receive a Single Goods Declaration which must be shown on shipping documents in order for the cargo to be cleared in Nigeria.  This is significant for U.S. exporters as it is necessary for shipping documents to bear this information in order for a shipment to clear customs upon arrival in Nigeria.  Failure to furnish this information will result is seizure of goods. 

 

Although exporting to Nigeria can be difficult at times due to the logistics requirements and sanctions, it can also be very lucrative for your business. The opportunity to “own a market” currently exists in Nigeria! If you haven’t already, you should make Nigeria a part of your international growth plans.

 

 

Doing Business with Turkey

What You Need to Know about Doing Business with Turkey

Import Exporting Turkey

As we continue our series on the rising economies of the MINT countries, this month’s focus is on Turkey.  Situated at the crossroads of Europe and Asia, Turkey has long been a significant market for international commerce and continues to enjoy the benefits of its location as the trend of globalization continues.  It’s no surprise that Southern Europe, the Middle East and Central Asia are all vital markets that benefit from Turkey’s infrastructure, manufacturing and trade. 

As a NATO member, Turkey offers an environment that is both politically and environmentally friendly to the United States.  In 2013, U.S. exports to Turkey were valued at $12.1 billion while imports stood at $6.7 billion.  The combined two way trade makes Turkey America’s 37th largest trading partner.  U.S. exports to Turkey, aside from agricultural products, consist primarily of Mineral Oil, Iron & Steel, Aircraft, Industrial Machinery, Cotton Yarn and Fabric. 

Despite offering a friendly trade environment, it’s important to know that Turkish customs has very strict and difficult procedures to adhere to.  Shipments have been known to sit in Turkish government facilities for periods as long as a year simply due to discrepancies in documentation.  U.S. exporters should be keenly aware of the requirements their goods are subject to as a lack of compliance can potentially eliminate opportunity to realize profitable sales.  CTAAgricultural and food products are subject to the highest levels of scrutiny as they require importers to obtain a Control Certificate from the Turkish Ministry of Agriculture and Rural Affairs.  Over the years, we have taken on many customers who experienced tremendous difficulties as their logistics providers did not take the time to plan shipments in close coordination with Turkish customs.  To simply rush the goods out the door without planning for customs delays and objections is a recipe for disaster. 

For commercial goods, outside of the agriculture and foods sector, exporters must ensure that their shipments are properly prepared. They must be accompanied by bills of lading, packing lists and commercial invoices.  We cannot stress the importance of accuracy with your invoices.  Turkish Customs can withhold the release of goods for any discrepancies or irregularities in commercial invoices such as misspellings, discrepancies between commercial invoices and packing lists, improper calculations or tallies on invoices, and other such mistakes.  Exporters who are shipping samples of their products to prospective customers should exercise extra caution as “zero value” invoices will almost never be released by Turkish customs.  “Zero Value” invoices essentially list the product being shipped as an invoice of no commercial value, and from the standpoint of the exporter and importer this is factual.  However, Turkish Customs (and in fact many customs agencies around the world) see this as an attempt to circumvent duties and other taxes which can cause product to be impounded and destroyed.  At the very least this can present a disruption to a marketer’s business process, but more importantly the cost of shipping, storage and potential penalties and fines can cause significant financial losses.  A client of ours once tried to ship a powdered beverage mix to Turkey using one of the global courier companies, but without proper advisement on how to prepare the material, found their product (tons of it actually were being sent over for R&D testing purposes) held up by Turkish customs for nearly 6 months without any corrective action being offered to resolve the matter.  We couldn’t help them with the batch of material that got stuck in Turkish customs, but were able to prevent future mishaps by setting up a process that ensured proper customs compliance well before departure of the goods.  

From a transportation and logistics perspective Turkey is developing its infrastructure at a rapid pace.  Recent government funded projects include investments in tunnels connecting the country’s Asian and European cities, expansion of ports, and the national airline is on track to become the world’s largest airline.  As a result, U.S. exporters will find no shortage of transportation options available for delivery of their export sales.

With a projected economic growth rate of 4% per year, and a growing entrepreneurial class, Turkey offers excellent growth potential.  With a population of nearly 75 million, it is also one of the largest countries in the Middle East and hence boasts a very strong domestic market that will continue to be a source of opportunities for U.S. made goods.    

JAPAN – Powering US Exports

Japan – Powering U.S. ExportsJapan export chart

While ample attention has been paid to BRIC countries and a new focus is developing on MINT countries the fact is that Japan has long been one of America’s largest trading partners.  In 2012 U.S. exports to Japan totaled US$116 billion and with a combined 2 way trade volume of $204 billion, Japan stands as America’s 4th largest trading partner as well as the 4th largest market for U.S. exports.

As we had highlighted in this recent post Japan is the 3rd largest market for U.S. medical devices and equipment exports and in fact, according to some estimates may even be the largest market for these U.S. manufactured products.  Not surprisingly then, products classified as “Optical and Medical Instruments” account for the largest amount of U.S. exports to Japan.  Additionally, U.S. exporters will find strong demand in Japan for aircraft and parts thereof, machinery, electrical machinery and meats.  Collectively these five categories account for the majority of U.S. exports to Japan.

While the value of Japan as an export market has been well documented and established for decades, U.S. exporters need to look beyond market size and pay attention to key aspects of the trade process including logistics infra structure and trade practices and the implications of these matters on landed cost.

As a country with significant land and size constraints, as well as a dearth of natural resources, Japan faces very high costs of real estate and raw materials.  As a result costs of warehousing, labor, fuel and other inputs of the logistics process are high.  U.S. exporters should be aware of this, especially when selling goods on a Door-to-Door basis.  While Japan has excellent infrastructure, services such as trucking are very expensive and can have a significant impact on order profitability.

Similarly, with warehousing, Japan lacks the square footage that American companies are used to and this makes itself evident in terms of high storage costs.  U.S. businesses who are required to arrange storage of raw materials or finished goods inside Japan must carefully consider these costs when evaluating the viability of an export sale to this market.

U.S. exporters must also be aware of Japanese customs regulations.  While Japan is a great market with significant potential, it has also been traditionally highly protective of its local industries.  As a result, exporters must ensure proper compliance procedures are being followed not only by themselves but also by buyers, distributors or their subsidiaries in Japan.

In order to maintain compliance with Japanese customs regulations, U.S. exporters must ensure that their customer has secured the necessary import permits from the Director-General Japanese Customs.  Once an import permit has been established, exporters must ensure that all shipments are accompanied by a Commercial Invoice, Bill of Lading or Airway Bill, Certificate of Origin and Packing Lists.

For exporters dealing in goods that are licensed, a copy of such licensing and/or original documentation is required.  Similarly, goods that qualify for duty exemptions or rebates should be accompanied by statements of reduction and any supporting paperwork that may apply to WTO trade, non-WTO trade and the General System of Preferences.  Failure to comply with these requirements can result in goods being detained or even confiscated upon arrival in Japan which can have a severe impact on order profitability and repeat or long term export sales in the country.

Fortunately, Japan has world class transportation infrastructure.  Hence while the cost of doing business may be high, the ability to physically access all major markets exists, and is highly efficient.  Japan’s ports, and in particular Yokohama are amongst the biggest in the world in terms of container shipping volume and offer state of the art handling.  Japanese airports, similarly boast world class handling, and both Tokyo (Narita) and Osaka (Kansai) are amongst the biggest airports in Asia in terms of cargo throughput.

Japan’s market size and spending power, as well as recent government initiatives to boost consumer and public spending will ensure it’s position as a growth market for U.S. exporters for years to come.  With this potential comes a great number of opportunities to meet market need and with nearly four decades of exporting experience to Japan, Crescent Air Freight has consistently ranked amongst the premiere logistics service providers on the U.S. to Japan trade lanes.  We welcome the opportunity to put our considerable experience in Japan to work for your export and import business in this dynamic market.

crescent air webinar

 

Top 10 Markets for U.S. Exports

Top 10 Markets for U.S. ExportsScreen Shot 2014-05-22 at 12.51.06 PM

At the Exporting Excellence™ blog, we’re all about international trade.  International trade does more to create jobs, promote cultural ties, create an interchange of ideas, transfer technology and promote understanding throughout the world than any other means of diplomacy, foreign aid, statecraft, etc.  Most of all, international trade is a great enabler of economic growth and wealth creation for all countries of the world.  While we have posted content about specific markets on this blog, we’d also like to introduce a series of lists that outline the best markets for U.S. exports in general and by specific industry.

The proof is overwhelming: export sales can grow your business far more than local sales.  After all, why limit yourself to your zip code when you can literally sell to the world.  Here then, is a look at the top 10 markets for U.S. exports:

# 1 – Canada.  Value of U.S. exports purchased in 2013: US$301.6  billion. Exporters of automobiles, trucks and accessories thereof take note: Canadians love large and midsized cars and trucks made in the USA.

#2 – Mexico.  Value of U.S. exports purchased in 2013: US$226.1 billion.  America’s neighbor to the south is well situated to engage in two-way trade with all NAFTA countries as we detailed in a recent blog post.  U.S. exporters of industrial machinery, agricultural products and dairy products will find a great deal of opportunity in Mexico.

# 3 – China.  Value of U.S. exports purchased in 2013: US$121.7 billion.  See, it’s not a one way street!  While China does supply an enormous amount of manufactured goods to the United States, American companies exporting agricultural products and hi-tech equipment are going to see growth in China for years to come.

# 4- Japan.  Value of U.S. exports purchased in 2013: US$65.2 billion.  Japan has a diverse consumer market as demonstrated by the fact that U.S. exports of medical instruments, aircraft equipment and industrial machinery are in high demand.  Japan, like China, is a good market for U.S. technological goods and services.

#5 – United Kingdom.  Value of U.S. exports purchased in 2013: US$56 billion.  See how trade works?  Not only political allies, but also major trading partners, the U.S.-U.K. relationship remains one of the closest in the world on so many levels.  U.S. exports of agricultural products as well as foods continue to enjoy growth in the U.K. despite the economic turbulence of recent years.

# 6 – Germany.  Value of U.S. exports purchased in 2013: US$44.2 billion.  Technological goods, pharmaceuticals and medical equipment from the United States are in high demand in Germany.  It is the strongest of Europe’s economies and should be a key part of your Europe export strategy.

#7 – Brazil.  Value of U.S. exports purchased in 2014: US$44.1 billion.  We profiled Brazil in a recent blog post as it offers great potential for U.S. exports.  Machinery and aircraft equipment account for the lion’s share of Brazilian imports from the U.S.  Tourism also remains a growth sector with substantial interest from U.S. tourists and investors.

# 8 – The Netherlands.  Value of U.S. exports purchased in 2013: US$42.6 billion.  U.S. exporters in the fields of “Clean Tech”, medical equipment, and biotechnology will find The Netherlands to be an attractive market with strong growth potential.

# 9 – South Korea.  Value of U.S. exports purchased in 2013: US$41.7 billion.  Along with Canada and Mexico (NAFTA), South Korea is one of the few countries that shares a Free Trade Agreement with the United States.  Opportunities abound for companies exporting aircraft related equipment and for providers of research and development services and technology.

# 10 – France.  Value of U.S. exports purchased in 2013: US$31.8 billion.  Known for their rich artistic tradition, ironically, French imports of U.S. artwork exceed $200 million annually.  Industrial goods such as specialty chemicals and high technology equipment from the United States enjoy strong demand in France as well.

Sources for this list include the U.S. Commerce Department which publishes superb trade data available at no cost to U.S. businesses. 

Additional country data was obtained from the U.S. Bureau of Census, and Inc. Magazine.