Shipping – Sea, Air and Inland Freight
Freight & Logistics Management of Your Brewery Equipment. What you see written below is an extract of knowledge, based on my own experiences with shipping equipment, primarily out of China and the USA, and into Australia, including the inland component on both sides of the journey. I am by no means an expert on shipping and freight, nor do I want to be. I have an expert shipping agent for that! So let’s get you some insight into what happens when you need to get your gear from there to here.
Got the Basics Sorted – Now What?
So, you’ve decided to go ahead with that new toy of yours – the brewery. Right?
- Business plan; check
- I have my eye on premises; check
- DA submitted; check
- Equipment sized up and priced; check
- Finance; check. Maybe…
Hey, what about getting the gear from wherever it’s being manufactured, to your new premises? Oh yes; we will ship bits from China, the USA, Italy, maybe the UK. When it comes, we’ll grab the forklift, unpack it all and place it where we need it.
Okay let’s have a closer look at those ideas. Thera are some things you should know.
- MOST IMPORTANT! Shipping begins at the factory and ends at your premises
- When a supplier gives you a shipping price, it is usually accompanied by an abbreviation: have a look at the shipping term they use on their quotation (commonly called “Incoterms”). Some of the common Incoterms we use are FOB, CIF, EXW
- So what do these terms mean?
- The Incoterms® are a set of 11 individual rules issued by the International Chamber of Commerce (ICC) which define the responsibilities of sellers and buyers for the sale of goods in international transactions. Of primary importance is that each Incoterms rule clarifies the tasks, costs and risks to be borne by buyers and sellers in these transactions. Familiarizing yourself with Incoterms will help improve smoother transaction by clearly defining who is responsible for what and each step of the transaction.
- DHL has a great explanation with explicit graphics; see here
As you can see in the DHL incoterms model, the Incoterms® 2020 rules are grouped into two categories reflecting modes of transport. Of the 11 rules, there are seven for ANY mode(s) of transport and four for SEA or LAND or INLAND WATERWAY transport.
The seven Incoterms® 2020 rules for any mode(s) of transport are:
EXW – Ex Works (insert place of delivery)
FCA – Free Carrier (Insert named place of delivery)
CPT – Carriage Paid to (insert place of destination)
CIP – Carriage and Insurance Paid To (insert place of destination)
DAP – Delivered at Place (insert named place of destination)
DPU – Delivered at Place Unloaded (insert of place of destination)
DDP – Delivered Duty Paid (Insert place of destination).
The four Incoterms® 2020 rules for Sea and Inland Waterway Transport are:
FAS – Free Alongside Ship (insert name of port of loading)
FOB – Free on Board (insert named port of loading)
CFR – Cost and Freight (insert named port of destination)
CIF – Cost Insurance and Freight (insert named port of destination)
In practical terms, you need to be sure you’re getting the full picture of how your new toys (and rather large investment!) are going to get from the manufacturer to your doorstep. One way is to simply ask the person quoting whether their shipping quote is door to door, all paperwork, everything.
Is my quote a “locked-in” price? – Freight & Logistics Management of Brewery Equipment
In the shipping game, each quote is an estimate. There are many moving parts that make up the journey between the manufacturer and your premises, and each moving part is subject to seasonal events (Christmas, Easter and other major holiday-type events etc.) environmental, economic and political changes. These changes reflect back on the consumer in the form of price changes (mostly increases!)
The parts of the journey which are most likely NOT to change, or to change very little are generally:
- Government fees and charges
- Local shipping agent’s fees and charges
- Local freight rates
- Demurrage / storage rates
What we have no control over are the costs that are affected by international events. These can be very volatile:
- Sea freight –
- affected by Covid outbreaks, dock strikes, fuel prices, outbreaks of violence, etc. there is no way to predict what is going to happen between the time you get your first shipping quote, and the day you have to pay the final invoice
- Peak periods, much the same as holiday peak periods, can in some cases, double or even triple the cost of your sea freight. Major peak periods are normally October till around February, and Easter
- Air freight
- Much the same as Sea Freight
- Local fuel charges – where inland freight is concerned
First off, sea freight as you would probably guess, is a slower mode of shipping than air freight. Both have their pros and cons.
You may have noticed that when you speak to someone about sea freight (or “shipping” in general), one thing that is almost always mentioned is “containers”. Containers come in various sizes and configurations. What we would be mostly concerned with for shipping equipment via sea freight are things like:
- How large the piece of equipment is that we’re transporting (dimensions)
- How many items there are
These will determine the size and quantity of the containers to use to find the most cost efficient method of transporting your goods between origin and destination ports.
For instance, a larger brewery could quite easily take up one or more 40’ containers. Each container will be costed at the going price on the day we get the quote. Consequently, a 40’ container costs more to ship than a 20’ container – it comes down to space on the ship and how many containers the shipping line can fit on board.
There are various configurations of containers for loads that may for instance be more bulky than others.
If the load is small enough, it may require only some space inside a container. In other words, you can share space in a container with other goods destined for someone else. This would commonly be referred to as a LCL or loose Container Load. It follows that this is a cheaper way of transporting goods by sea than hiring a full container for something that doesn’t need all the space (within reason).
Generally, if you fill a 20’ or 40’ft container with your equipment, the dimensions and weight of the equipment is of no consequence. The pricing is done by container size and configuration.
If you equipment is too large for even a 40’ or 45’ container, the shipping agent will source a frame. The frame is basically a container without a roof – or sides – or both. It’s a skeleton to which the equipment is secured. Frames are typically more expensive than regular enclosed containers, due to several factors – the frame handling equipment may differ from regular container handling equipment at different ports; frames take up more space n the ship than regular containers; when goods are removed at different ports, the frames may have to be taken off then replaced n the ship in order to get other containers offloaded – the ports would need the necessary equipment to do this.
Air freight is mostly costed by dimensions and weight. Cubic meters and Kilograms. There is also a height consideration that affects goods transported by air. If the packaged goods are too tall for say the loading door of the aircraft, it may have to be loaded in another section of the aircraft, and that could result in higher costs. Generally, air freight is more costly than sea freight. The obvious advantage of air freight is shorter delivery time. – a week as compared to several weeks at sea.
Trucks and trailers are a common and effective method of getting your equipment from the destination port to your premises. If the final destination is a rural area, an inspection is most likely to be mandated. This is called a tailgate inspection. It attracts a fee.
The alternative is to put the goods on a train; however some container companies are reluctant to send a truck somewhere just to collect their container/s. It is far more cost effective to use a trucking company to take the goods to a site, offload the goods, then return the container as part of a round trip.
There are a few methods of delivering inland freight by truck; these are what we commonly use:
- Truck arrives at premises; customer offloads the container while it’s still on the truck. Driver waits one hour (typically) before returning the container to depot. If the load is not out of the container within the first hour, the trucking company will charge the end user a nominal rate per hour for the extra time taken to offload
- Truck arrives at premises, offloads the container on the ground, leaves the premises (perhaps to deliver other loads). Customer has more time to offload the goods – sometimes a couple of days. Truck returns at a predetermined time to collect the container and return it to depot. Again, if the container is not unloaded by the time the truck arrives to collect it, the trucking company will charge a nominal rate per hour for the extra time taken.
- Goods are offloaded from the container at the destination port and loaded onto the truck (loose load – secured of course!). Truck delivers the loose items, which the end user has to unload on premises. The one-hour timeframe limit and penalties apply here too, as above.
Between Factory and Destination – Freight & Logistics Management of Brewery Equipment
After your equipment has been manufactured, the various components need to get to the nearest port so they can be loaded onto a ship. In the case of air freight, the same applies to get your goods to the nearest airport.
When your equipment arrives at the airport, it will have to be transported to your premises after being cleared by customs.
In both cases, there is documentation to be completed by the sender (manufacturer) and fees paid to get the goods onto the transport and off on its journey.
When the goods arrive at the destination seaport or airport, again there is paperwork to be completed, customs clearance, perhaps customs (Border Patrol) wants to inspect the load for their own reasons. Everything here attracts a fee.
Once your new toys have cleared customs, they will need to be transported to your premises. In Australia this is normally conducted using a truck or several trucks as described above.
When you spend a good sum of money on investing in your future business, you’d want to be sure it is in good order when it arrives. If something happens along the way, you would want the problem resolved, right? This is where transit insurance comes into its own. For the relatively low cost of transit insurance, if say your container falls off a ship (yes, we know this is known to happen!), you’re covered. Dents; covered; breakages, covered. You probably know all of this, but it’s worth noting, because this is often a forgotten factor when budgeting for your business.
Once the shipment arrives in Australia, the ATO will determine the actual cost of the goods, according to their guidelines, and current rates of exchange. They will apply GST to this price. This is one of the reasons why a shipping quote is always an estimate, not a hard and fast quote.
What about Import Duty and GST on imports?
As our imports are mainly from countries like China and the USA, the free trade agreement between Australia and these countries means that you don’t pay import duty on new manufactured goods. A good place to find out information on what goods attract import duty and what doesn’t, start here:
Almost everything you can think of to import is classified into categories, and each item (or group of items in some cases) has a reference number attached to it. That number will tell you how much import duty (if any) you will have to pay on it when it hits our shores.
Synergy Custom Solutions Value-Add
At the end of the day, a shipping agent or freight forwarder is pretty hard at work most of the time conducting these tasks not only for Synergy, but for all their other clients too. It’s what they do.
Our value-add is looking after our customers’ interests by communicating frequently with them, telling them where their shipment is on its journey. We are well aware of the things in a customer’s world that a shipping agent wouldn’t need know about. Marketing plans for instance, launch plans, social media releases, supply deliveries and other expectations that all fit together like a puzzle to make a brewery opening, or launch a success. Any or all of these things could be affected by delivery delays for whatever reason that may occur, and no entrepreneur wants to disappoint their potential customers. We want our customers to be as prepared as possible, so they can plan around their equipment delivery.
We know that preparations for a delivery may include hiring lifting equipment and the scheduling involved with that task; ensuring that there is adequate staff on site to assist with offloading so that activity is completed in as short a timeframe as possible. Staff is not cheap, so payment for getting people in to help needs to be factored into the delivery/offloading exercise. So, we also make sure we stay close to the truck driver’s schedule, so we can predict reasonably well when the truck is likely to arrive on site.
There is so much more to shipping / freight than meets the eye. If you have any questions, or need clarification on anything written here, please contact us any time.
Further Content Related to the Topic
Gavin featured in Series 1 of the BMAB Podcast in the Brewery Equipment Sourcing Segment, where he talked in some detail on the important considerations brewery owners should be aware of in relation to freight and logistics management when sourcing equipment from overseas.