The Real Costs of Cheap International Shipping

Could Cheap International Shipping Be Costing You?

International shipping costs can make up a considerable portion of the cost to import or export goods. As such, importers and exporters are often looking around for a good deal.

One of the most common mistakes typically made by shippers is to confuse “cheap international shipping” with “a good deal”. All freight shipping, and especially international freight, comes with inherent risks. Cheap shipping providers can often ignore or obscure those risks in order to provide what seems like a better price.

Below, we outline some of the elements to consider when planning to ship goods internationally.

The Risks of Cheap Shipping

The risks of using cheap international shipping are usually attached to the unknowns. As such, it is important to ask a number of questions first.

What is the reputation of each of the shipping lines you are considering?
Are they properly insured?
Are they paying their bills? What is the financial outlook for the shipping line?
What is their reputation?
Who takes on the liability for the delivery?
Are you getting good or honest advice?
Are there other concerns that a shipping line is ignoring, such as environmental issues?

Asking these and other questions helps you to make appropriate decisions for your business shipping requirements.

The Financial Risks of a Shipping Line

At least some knowledge of the financial situation of a shipping line is useful.

Is the company at risk?
Are they paying their bills?
Is the company backed by banks or even governments?
If something goes wrong, what is the liability to your, the customer?
Is there transparency about these issues?

If a company is not paying its bills or being properly insured, the risk and liability to the customer are increased. Shipments can be delayed or halted with little or no warning, and sometimes with doubtful legal status.

Whilst the issues of financial risk are more likely with smaller shipping lines, the big players are certainly not immune.

A number of years ago a very large international shipping company based in Korea went bust. They were offering cheap but ultimately unsustainable shipping rates. They ended up with a global debt of over US$25 Billion.

There were many people who were aware of the situation but had chosen to ignore the signs.

As a result, their vessels were arrested and impounded. All cargoes were offloaded at whichever port they were in at the time. This left many containers stranded and their owners scrambling to find alternative shipping options.

Many people lost a lot of money. Having a knowledgeable freight partner can help you avoid many of these risks and potential losses.

The Risks with Shipping Insurance

Shipping insurance is available exactly for the purpose of covering many of the risks associated with international freight shipping. The risks with insurance come in a number of forms;

Failure to insure shipments at all.
Under-declaring or mis-declaring cargoes.
The insurance does not cover certain circumstances or destinations.
Insurers unwilling to insure certain (smaller) shipping lines due to perceived risk.

The world is an uncertain place. International freight transportation can be just as uncertain.

There are always unexpected or unforeseeable circumstances, from weather and wars through to simple changes in delivery schedules. Whilst delays can be costly, delays on time-sensitive goods can be disastrous.

Protecting your goods and your business against the unexpected is why we always recommend you take out freight insurance. However, there are situations where cargo insurance is not available or even on offer to some shipping lines. Knowing which ones in advance can be extremely helpful.

Additionally, if you are importing, be aware of where the goods are shipping from. More so, understand the shipping terms you have agreed to (if you have not arranged the shipping yourself). Not all parties will be honest and upfront with you. Some countries have a greater reputation for this than others.

An under- or mis-declared cargo may be discovered at any point along the route, although potentially not until the destination customs. The longer the time for discovery, the greater the impact is likely to be on your business.

Check, check, check, and know the terms of shipping.

Environmental Issues with Cheap International Shipping

We all know that the environment needs care. Most countries have at least some environmental protections in place. There is considerable environmental impact with international freight shipping, and there are a number of factors under consideration. These are;

Fuel quality. There is a move towards using low sulphur fuels or clean fuels to reduce polluting emissions. Some smaller carriers especially may not follow these guidelines or regulations.
Vessel maintenance. Poorly maintained vessels are at higher risk of failure or leakage. This can lead to more toxins and pollutants entering the environment.
Intentional or uncaring pumping of unclean ballast water or bilge water. Both these can contain pollutants or organic materials that are hazardous to the local environment. Discharge of either of these in sensitive marine areas can cause untold damage. Additionally, bilge water is meant to be treated before discharge to remove contaminants. Some carriers avoid doing this in order to save costs.

Environmental risk and regulations are one area in which unethical shipping lines can make considerable cost savings by ignoring. They are also hard to pin down and are therefore obscured to the shipper.

Additionally, and similar to the previous risks, is if a vessel is delayed or impounded due to a breach of environmental regulations. You are the one that takes on the liability for such risk.

Using Larger Shipping Line vs Smaller Shipping Lines

Ports are built where geography allows, as close as possible to major centres of trade. Many deliveries, however, are bound for more distant locations within a local region.

Shipments are usually transported to the nearest major port aboard larger vessels then transferred to smaller vessels for local deliveries. Even past the secondary port, there can be further road or rail transportation required.

Generally, there is more risk inherent with the smaller shipping lines and local deliveries. If a shipment has been arranged through a larger line, however, they can carry the risk all the way to the destination. When the smaller shipping lines are arranged directly, the shipper (often yourself) carries more of that risk themselves.

This is all reflected in pricing. The more risk you take on personally (whether obvious or not), the cheaper the shipping prices you can be offered. It is the awareness of these risks that will help prevent getting caught out.

Direct with a Big Carrier vs Smaller Freight Forwarder

As a smaller freight forwarding company, we get asked: “Why not go with a large shipping line directly?” There are a couple of answers to this;

First of all, a large shipping line deals with customers of all sizes, all the way up to major multinationals. Smaller clients will be relatively less important within the context of a large corporate business.

We are betting that you are not a multinational company but would still like good customer service. SPLS provides that service and are available to you 24 hours a day should the need arise.

Secondly, with us, you receive the full benefit of over 40 years experience and knowledge in the shipping industry. With a major shipping line, you are more likely to get a relatively inexperienced junior dealing with your shipments.

We offer;

Awareness of the sometimes intricate and confusing processes of international shipping.
Knowledge of local shipping laws and regulations around the world.
Direct service. You will always know who you are dealing with.
Reduction in risk associated with your shipments, whether for import or export.
Transportation between other countries, not only to or from Australia.
Always on-hand to manage a shipment should something unexpected happen.
Development of freight plans for business to reduce uncertainty.

In general, better service is what you get with a small freight forwarder.

Cost vs Value

As the saying goes “there is no such thing as a free lunch”. What you get tends to be what you pay for, and cheap international shipping is no different.

Of course, there can be pricing variation and competition as with any industry. The important thing with international shipping is to be aware of the potential risks and liabilities you are taking on-board with any reduction in price. You may find too late that some of these you are not willing to pay.