6% VAT now chargeable on freight costs from China - effective 1st August 2013 - Latest news

Further to our last blog regarding this rule change in China, it seems that it is causing quite a few issues, with lines such as Maersk making a clear statement that they will pass the 6% VAT on to customers, be they direct customers or freight forwarders.

As expected, it is bringing about a change of buying terms with customers who previously purchased on terms where freight charges (port-port) were prepaid (eg CFR,CIF) changing their Incoterms to FOB or EXW.

We've always recommended that importers buy on FOB terms from Asia as you have far more control over the service levels and destination charges and can ask the supplier to back out freight costs from their product prices.
http://theloadstar.co.uk/forwarders-forced-to-duck-and-dive-as-china-imposes-vat-on-ocean-cargo/

Until the next time.


Kind Regards



Andy Cliff

Maersk McKinney "Triple E" Mega Container vessel arrives in Europe for first time

Good afternoon All

This really is impressive. Imagine a vessel which can carry over 18,000 twenty foot containers (18,000 TEU) ! Less of a container ship, more of a floating island!

This is the first of a new breed of container ship which arrived in Rotterdam on 16-Aug and will be followed by 19 more of the same design for Maersk Line.

The general idea here is to reduce the lift cost per container by fitting as many containers as possible onto this new breed of ship.

http://theloadstar.co.uk/first-triple-e-arrives-in-europe-picture-special-on-the-worlds-largest-boxship/

Interesting report from Maersk Line reveal solid financials for 2013 and reducing costs/TEU

Good morning All

Interesting report below from Maersk who are the world's largest line, and whose financial performance is a good indicator on the health of the industry, and often, the future direction of freight rates.

We've all seen the large ocean freight rate rises from Asia in Jul and August this year and with another planned for September, this is a hot topic.

What is interesting about Maersk Line isn't that they are doing better financially (profit doubled in Q2 vs Q1, I'm more interested in the fact that they're managing to reduce their costs per container by 11% (USD 394 per 40 foot). Seems this was due to reduced fuel (bunker) costs and I'd imagine, their move to larger and larger vessels like the 18,000 TEU Emma Maersk below.

They have said they are always striving to be more competitive but that they are being very careful to manage capacity on the Asia Europe lane as of course over-capacity would drive rates down. They've still got a dilemma though as there are only a couple of trade lanes where they can redeploy the smaller 5000-10000 TEU vessels so my bet is that rates will soften as all lines reduce costs and continue the fight with each other over what is a commoditised offering.

Importers - what's that saying "Never assume as it makes and "ass" out of "u" and "me"...?

Good morning All

Thought I'd drop this one into the blog again as only last week, we took on a new client where the Customs classifications needed a complete review, and the overall impact is that they are paying twice the rate of duty they should. Thank goodness we came along. It also turns out that they are not claiming allowable duty reliefs on imports from certain developing countries. This will have a huge impact on their landed costs as you can imagine. I suppose the question many customers would ask is, "Well, if we're paying the freight forwarder to bring the goods in and clear them, isn't that their responsibility?" Actually, it's not and to be honest, they have no interest in whether your duty rate is 5%, 2% or zero. They are often very focused on the delivery and getting the shipments billed out and on to the next shipment..I should also mention that we are likely to also save them around 25-35% on their freight costs. Big numbers.

So, to summarise, never assume that your imports are being correctly classified or that your freight or duty costs are as sharp as they could be.
 

. If you're a UK importer, you have responsibilities to HMRC as the importer. 99% of UK importers will use a freight forwarder or Customs clearance agent to get their air and ocean shipments cleared through Customs so they can take delivery and either get it into production, or out to their customers - job done!

Just a word of advice. When you use a freight forwarder to carry out the Customs clearance for you, they're (99 times out of a 100) acting as a Direct Representative. So what the heck is that? It means that although they declare the goods to Customs and sign the Customs Entry (C88), you're liable as the importer for the accuracy of the entry.

That means some fundamental things such as:-

1 - Correct tariff classification (which affects the duty rate payable)
2 - Correct value delcaration
3 - Correct currency code
4 - Declaration of marine insurance (dutiable)
5- Declaration of correct freight charges (dutiable)
6 - Correct/appropriate Customs regime (home use/IPR/OPR)
7 - Value delcaration (is the value on suppliers invoice genuine)

There are others too but these are the main ones.

HMRC have issued leaflets to remind customers of their responsibilities in this area (see below photo) however they're not well publicised and the wording inside may be confusing to the average UK importer (who has most likely never completed a Customs entry in their life!).

We carry out Customs Compliance work for many of our import customers so they know they're compliant, they're paying the right amount of duty, the correct tariff codes are being applied for the different products they import and they're taking advantage of any Customs duty reliefs which are available. The other big benefit is the obvious one - peace of mind, it's being managed, if we get a Customs visit, we can show we carry out a compliance process to ensure any errors are picked up and corrected.

http://www.straightforwardconsultancy.co.uk/

This was how we uncovered a £ 26,000 duty overpayment for a Warrington customer earlier this year, importing catering equipment from the US. The mistake went back 7 years but we can only reclaim 3 years worth of overpaid duty (127 Customs entries).

Please let us know if you need any advice regarding compliance as well as any general freight or logistics advice it's what we do (and what we're really good at).

Kind Regards


Andy

UPS freighter aircraft crashes in the US

Good afternoon All

This is apparently the 2nd loss of a UPS cargo aircraft, last time was in 2010 when a Boeing 747F crashed in Dubaihttp://theloadstar.co.uk/two-crew-members-killed-as-ups-freighter-crashes-near-alabama-airport/

Condolences of course to the families of the 2 crew who were killed in the incident.

Kind Regards


Andy Cliff

Global warming opens up new trade route possibilities from China to Europe

Good afternoon All

Really interesting story here. Going via the Arctic route from Asia to Europe because of global warming.
http://www.cnbc.com/id/100954506

Kind Regards


Andy Cliff

More Asia-Europe rate increases - July, Aug and now September

Good afternoon All

After we hit the market rate lows in June this year (when we advised our clients to ship as much product as possible), we saw a historic General Rate Increase (GRI) of USD 1000/20 (TEU) in July, followed by a USD 500/TEU increase in August and we're now seeing another hefty increase for September of USD 500/TEU.

Seems the lines are determined to keep the pressure on with a stream of rate increases to recover any losses they've made in the first half of 2013.

The question is, what rates are you paying in August 2013 - the reason I ask is that I visited a company this week with full container traffic ex Shanghai and firstly, their forwarder hadn't even let them know their rates for August but when they did confirm them, the rates were USD 425/20 and USD 750/40 more than the rates we could achieve - a huge difference.

It really pays to investigate this area and ensure you're paying a competitive rate, especially as more increases are on the way.

Below sample of GRI notification from MSC.
http://www.mscgva.ch/news/news_detail_eid_959_lid_2.html

Kind Regards


Andy Cliff

Typhoon in Asia closes ports of Yantian, Hong Kong, Shekou, Chiwan, Da Chan

Good afternoon All

I've just received this bulletin which is important news for any customers exporting to or importing from China, especially as 5 ports are affected.
Let's hope there are no more incidents like the MOL Comfort which split into two when encountering heavy seas. See our earlier bulletin regarding MOL Comfort.

Typhoon Utor

Heavy rain, strong winds and waves of up to ten meters are causing transport chaos in southern China, Macau and Hong Kong today as Typhoon Utor sweeps through the region.

Operations at most terminals in the ports of Hong Kong, Yantian, Da Chan, Shekou and Chiwan have been suspended until further notice and more than 200 flights have so far been cancelled or suffered heavy delays at Hong Kong International Airport due to the typhoon.

Kind Regards


Andy Cliff

HMRC on a mission regarding VAT exemption on UK exports

Afternoon All

I spotted this one yesterday and thought it was worth sharing. Seems that HMRC are targeting UK exporters who claim VAT relief on UK export sales as many are not export compliant and cannot prove the goods actually left the UK.

We've noticed that HMRC are becoming more vigilant on the import side too, where of course there are sometimes richer pickings as Import Duty is also involved.

http://rsmtenon.uk.com/1R6C-1QJ9C-5CACS7VCD1/cr.aspx

Key thing here is to make sure you have a solid process to demonstrate Customs compliance so that if HMRC do make a visit, you won't have that sinking feeling as there are gaps in your process or paper trail We carry out Customs compliance for many of our customers so that they are sure that the freight forwarder has made accurate declarations, and should we get a visit, we can find the records very easily and any Customs visit is a breeze.

Kind Regards


Andy Cliff

Freight forwarders - choosing the right one...

We contributed to a discussion on LinkedIn today led by Lucy Smith of Lloyds IFW. Steve Walker, Chairman of SBS Worldwide is their guest editor and kicked off the discussion on choosing the right freight forwarder.

http://www.linkedin.com/groups/Freight-forwarders-choosing-right-one-2846198.S.263450705?qid=82f18e33-23c4-4cc9-85de-7308dc9cebb3&trk=group_most_popular-0-b-ttl&goback=%2Enmp_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1%2Egmp_2846198

Our piece is below

Hi Lucy

Thanks for your post. I read Steve's article and I agree that it's really important to find the right freight forwarder and of course as an importer or exporter, to understand your responsibilities from a compliance perspective.

I began my career at a small freight forwarder, an old fashioned import and export clearance agent called Immediate Transportation and went to progressively larger companies in different roles, latterly working at DHL (DHL Global Forwarding). I launched Straightforward Consultancy in early 2010 so have quite an interesting view of the freight forwarding marketplace as we deal with several.

One assumption it would be fair to make is that small = personal service, more expensive and large = less personal, more competitive but it really isn't that simple.

At Straightforward Consultancy, I gain a really good insight into many different forwarders, large and small because we've placed business with those forwarders after a thorough selection process or they're contacting us to offer their services for our existing customer portfolio.

Today, we're workng with several forwarders and managing the customer's freight and Customs models for them, ensuring they remain competitive and compliant and as a result, we're engaged with the engine rooms of the forwarders and there are certainly large forwarders who disprove the big = impersonal theory in the same way that there are small forwarders who have a market leading service/pricing on a certain market or lane.

To take Steve's point on a little further, one thing we have observed is that most small-medium sized customers are not aware of their Customs responsibilities and that they should carry out compliance checks to ensure their chosen forwarder is submitting accurate delcarations to Customs on their behalf. We saw this first hand with a client in our early days where Customs did a random inspection and found errors on their import entries and they were fined £ 500. What we did for them was reassess all their commodity codes and each month we now carry out Customs compliance work for them to ensure they're compliant and are also ready with all supporting documents for the next visit. This has become another service for us and most of our clients take advantage of it.

To summarise, you really need to ask yourself a few basic questions when mulling over the merits of seeking out a new forwarder (not just the ones who call you!). For example, what are your current costs, is the service good, do you feel the pricing is competitive, is the support there when you have problems etc.

The problem most customers seem to face is a lack of time to carry out a review, a lack of market knowledge (is there anything better out there) and a solid process to follow to ensure any selection is a good decision. We've carried out many reviews since 2010 and we've learned which forwarders are competitive and equally, which provide consistent service and strong compliance.

We have a blog which contains our full background, relevant news for clients and useful tips which is work a look! http://straightforwardconsultancy.blogspot.co.uk/

Please do call me if you'd like to talk about your own business.

07934 443492 begin_of_the_skype_highlighting 07934 443492 end_of_the_skype_highlighting

Kind Regards


Andy Cliff
Straightforward Consultancy Ltd
4, Beckett Drive
Winwick Park
Warrington
Cheshire
WA2 8XJ

Tel : 07934 443492 begin_of_the_skype_highlighting 07934 443492 end_of_the_skype_highlighting
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Blog : http://straightforwardconsultancy.blogspot.co.uk/

MOL Comfort sinks off the coast of Yemen with 4000 containers aboard

Good morning All

I realise this is "old news" but MOL have today announced that 2 of the MOL Comfort's sister ships have had their hulls strengthened.

The thing that worries me is, how could a five year old container ship split into two and sink in fairly moderate sea conditions? At the time they were apparently experiencing a Force 7, one notch below a gale, and in ocean going terms, not really a sea state/weather condition to be overly concerned about.

I'm no expert on the structural integrity of container vessels but how the heck did this happen?

http://www.lloydsloadinglist.com/freight-directory/news/mol-comfort-sisterships-to-resume-service-with-strengthened-hulls/20018062053.htm?source=ezine

Nothing ventured, nothing gained - our new service - Import / Export Freight Healthcheck

Good morning All

We've just launched a new service for companies in the UK North West – our "Import/Export Freight Healthcheck"

 
If you're a UK importer or exporter in the North West, we’re now offering a cost effective way to give your freight and Customs arrangements an expert health check. For £ 149.00 + VAT, we will come to you and spend 3 hours reviewing key areas of your import/export freight activity, focusing on freight costs, service issues and Customs compliance. We'll review these areas and then provide you with a report, highlighting areas which will yield savings or improvements. Limited offer. Terms and conditions apply.

Contact myself, Andy Cliff via any of the below channels

Mobile Tel : 07934 443492
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Twitter: @AndyCliffSCL
Linkedin: http://uk.linkedin.com/pub/andy-cliff/1a/43/72

About Us
Straightforward Consultancy is an innovative, customer driven company who really understand the challenges faced by small to medium sized UK importers and exporters. Using our expert knowledge of the air and ocean freight markets, we achieve remarkable results for our customers who clearly recognise our value way beyond any financial savings or service improvements we deliver. We’re dedicated to the customer and work proactively to ensure their business benefits from our partnership, month in, month out.

Since we launched Straightforward Consultancy in 2009, we’ve achieved some great outcomes for our clients, ranging from financial savings of 35% via our Logistics Reviews, solutions to international logistics or Customs problems using our Virtual Logistics Manager service or day to day management of their freight and Customs models.

We’re passionate about quality, customer service and communication and have a broad commercial mind set, able to see things from a wider business perspective and how events in the logistics world may impact our customers.
We’re on a mission to support and protect the small-medium sized importer and exporter, typically those companies with freight spends between £ 50K and £500K per annum.

Many SMEs operate with very flat management structures and rarely have any in-house freight or Customs expertise. This often results in the customer paying far more than necessary and because their time is limited, supplier arrangements remain in place for several years, multiplying any overspend and making them uncompetitive.

Furthermore, the customer often isn’t aware of their Customs responsibilities and doesn’t check their Customs entries, so they could be overpaying (or even worse, be underpaying) duty, leading to fines by HMRC, who do seem to be carrying out far more routine importer inspections these days, in pursuit of additional revenue.

We can manage this area cost effectively, making sure customers remain competitive, Customs compliant and ultimately giving them peace of mind, knowing that this area is being professionally managed and that they have a lean, responsive and compliant freight model.

We’re extremely proud that all of our original customers are still on board in 2013, which we feel is a reflection of the on-going value we're bringing to their businesses and we do feel part of their team.

If you would like to discuss any aspect of your own supply chain or would like some independent advice, please do contact us. We're happy to speak with you or to have a no obligation consultation to see whether there are any opportunities to improve your current model.

We look forward to hearing from you. Remember, nothing ventured, nothing gained...!

6% VAT now chargeable on freight costs from China - effective 1st August 2013

Good morning All

If you import from China, please be aware of a change in regulations in China which now means that Chinese equivalent of VAT is now payable on transportation charges, be that air or ocean. 

The 6% VAT charge will be levied when the ex works or freight charges (or both) are payable at origin (Incoterms FOB,FCA,CFR,CPT,CIF,DAP,DAT,DDP).

For many UK importers, they will import from China on FOB terms, so they just pay the freight costs from port-port (or airport-airport for air freight) and the Ex Works charges are payable by the shipper. In these cases, the Ex Works charges will be subject to VAT.

However, many importers also import on freight prepaid terms, Incoterms CPT/CFR or CIF and so the whole of the freight costs from ex works to arrival UK port/airport will be subject to the VAT.

Here's the thing to watch. Chinese suppliers may seek to recover some or all of this extra cost from their UK customers however we understand that the VAT will be recoverable (as is the case here in the UK) provided the Chinese company is registered with the Chinese Tax Bureau. You would imagine that most reputable Chinese companies will be registered so they'll be able to reclaim the VAT.

It will pay to be vigilant, especially for people in sourcing/purchasing who deal with the Chinese suppliers because the suppliers may try to pass the charge on, even for just the origin (Ex Works) charges which the suppliers currently pay if terms are FOB.

It seems like change is the only constant in international trade!

Kind Regards


Andy Cliff

Asia-UK Full Container (FCL) freight rates - latest on rate increases...

What price are you paying to move your container from Asia?

If you are a regular importer from Asia, you'll know that we've been on a roller coaster as far as import freight rates have been concerned, where rates hit a low of USD 500/20 in January 2012, then sky-rocketed to around USD 1800/20 by July 2012, and then slowly sinking back to around USD 500/20 once again in June 2013.

The key thing here was that it was really important to actively manage this because when rates were climbing, the announced increase wasn't always accepted in full by the market (so you could be paying more than necessary), and equally importantly, when the rates were falling, not every freight forwarder was passing on the reductions as quickly as they might (so again you were paying more than necessary).

So, where are we now? Well, we had the historic rate increase for Jul 1st 2013 of around USD 1000/20 which the market accepted at about 90% (USD 895) of the proposed figure and then it slipped throughout the month by about USD 50/TEU (20ft) per week.

After 3 weeks (Fri 19-Jul) , the increase was at around USD 725 (of the USD 1000) however last week (26-Jul) it bounced back by USD 120 which meant that the market was anticipating the imposition of the next (Aug 1st) increase of around USD 500/20ft.

So, it would be a good idea to get a grip of this situation. Some companies I have visited recently didn't have up to date rates for July so I'm sure they're not alone. There also seems to be a big range of rates that importers are actually paying (around 30%!).

You really need to get a fix on what you're currently paying and clarity on what increase your freight forwarder plans to pass on to you this month because we're heading towards USD 1800/20ft and more if you don't take control.

This means your freight costs will have tripled in just 30 days...! We have competitive arrangements in place for our own clients however this is because we know the market and use that knowledge when negotiating any new rates. If you need someone to help you get a grip of this area, please do contact us, we're experienced and have the industry connections to relieve some of your cost pressures, and this is even more important when the dollar is pretty strong
(Asia inbound ocean rates are priced in USD).

My details are below.

Kind Regards

Andy Cliff
Director
 

 

Straightforward Consultancy Ltd
4, Beckett Drive
Winwick Park
Warrington
Cheshire
WA2 8XJ

Tel : 07934 443492
Email : andy@straightforwardconsultancy.co.uk
Web : www.straightforwardconsultancy.co.uk
Blog : http://straightforwardconsultancy.blogspot.co.uk/
Twitter: @AndyCliffSCL
Linkedin: http://uk.linkedin.com/pub/andy-cliff/1a/43/72
Skype: andy.cliff1@skype.com