SEMA News—April 2012
Don’t Let the Shipping Logistics Intimidate You
If your aftermarket business ranks among the growing list of SEMA-member manufacturers considering overseas exportation, you’re likely weighing shipping logistics as part of the equation. To be sure, the prospect can seem daunting. After all, once you’ve attracted foreign buyers, you have to deliver the goods in the face of numerous hurdles. With the right assistance, however, you can successfully navigate those obstacles and achieve a safe landing for your aftermarket parts.
“If you’re going to grow an export business, you need every bit of help you can get,” advised Rick Trudo, president and CEO of SCT Performance. “If you fall into the trap of the duties and customs and everything else, you’re going to be paying an exorbitant amount of money that almost prohibits you from shipping overseas.”
The Florida-based manufacturer of Ford and GM tuning parts started its export program in 2007 and now ships up to 200 packages per day to an overseas market consisting of 26 countries in South America, the Middle East and Asia. According to Trudo, the biggest costs often come from non-compliance issues that delay shipments, including paperwork mistakes, wrong declaration price and wrong classification of what a product is.
Since 2004 Advanced Performance Parts has also been a heavy exporter of aftermarket parts to distributors, dealers and tuners in 60 countries worldwide. Jeremy Barras, company president, agrees that documentation is the most difficult aspect of exporting.
“Exporting itself, once you understand the paperwork needs, is not very difficult,” he said, noting that the biggest difference he’s found between foreign and domestic markets is one of scale. “In general, performance-business export customers tend to be much smaller than your typical aftermarket replacement parts distributors here.”
A simple Google search will reveal many freight forwarders. However, here are a few names dropped by the SEMA members interviewed for this story:
Legacy Supply Chain Services (Formerly Griffin)800-361-5028
Pilot Freight Services
Consequently, Barras has two guiding rules. The first is to take no financial risk.
“If you export to any country worldwide, if you’re not taking payment in advance, you are entering a certain payment risk and, depending on the country, it becomes quite a large risk,” he asserted.
Rule number two is to stay above the law. According to Barras, there’s too much temptation, especially when you’re unfamiliar with exporting, to let foreign customers talk you into under-invoicing or otherwise skirting duty fees and value-added taxes. Thanks to modern technology and heightened security measures, however, authorities worldwide are in a far better position nowadays to enforce compliance.
On that front, Unz & Co. has served as an import/export compliance expert since 1879. Its Basic Guide to Exporting (available at www.unzco.com) lists four potential pitfalls for overseas shippers:
Packing: International shipping puts added demand on packaging. Especially when sent by cargo ship, product can be compromised by moisture and condensation; stacking, shifting and rough handling; and even pilfering. Whether shipped by pallet or container, product should be well protected, braced against stacking and as evenly weight-distributed as possible.
Labeling: Improperly labeled packages cause delays. Depending on destination, labeling requirements can differ widely. Package markings deal with everything from proper identification and handling to weights and measures as well as conformity with environmental, safety and other legal standards.
Documentation: Again, this is the biggest headache in the process. Bills of lading, commercial and consular invoices, certificates of origin, dock and warehouse receipts, declarations and licenses—the required documents go on and on, varying greatly from country to country.
Insurance: Terms of sale can place the burden of insurance on exporter or importer, and there are different types of coverage addressing method of shipment, loss, damage, delay, etc. Not surprisingly, international laws and agreements can affect liability based upon destination and other factors.
In short, doing everything right will breeze your cargo through customs. On the other hand, getting it wrong can quickly cost you time, money and the overseas business relationships you’ve so carefully cultivated. So where does a would-be global exporter go for help?
For more than a decade, Siriani has helped SEMA members save on their shipping logistics. While Siriani typically deals with companies shipping smaller quantities domestically, the company can also help connect higher-volume overseas exporters with an appropriate freight forwarder.
“We are a direct freight broker for the domestic part of the program,” explained Triina Turula, Siriana director of sales and marketing. “In the case of larger exports, we act as a consultant. The customer can call and tell us what they’re shipping, and we can tell them the best way to ship it. What we do is take their quotes—especially if it’s a larger quote—and put it out to our freight forwarders. We then send the best quotes that come back to the customer.”
Your chosen freight forwarder will then take possession of your shipment and arrange its transport by land, air and sea, shepherding it through customs. Traditionally, international freight forwarders are agents or companies that organize your shipments. They are not carriers themselves but coordinate the movement of your cargo by contracting with appropriate carriers. (Wikipedia dubs them “travel agents for the cargo industry.”)
“Most of our forwarders will handle the paperwork as part of their job,” added Turula. “There are still a lot of hoops you have to jump through, but when you work with the forwarder, they walk you through all that. Once the initial documentation is done, they handle it from then on.”
Depending upon the cargo and terms of contract, the forwarder may deliver your cargo to a hub or distribution center at or near a foreign port where your customer can take possession of it. Or the forwarder may also arrange “door-to-door” transportation to your customer. Sometimes your company will hire the forwarder; sometimes your customer will have their own.
Like many SEMA-member companies, off-road manufacturer Bushwacker relies on traditional freight forwarders to ship into South America, the Middle East, Australia, China and Europe.
“We had a choice to make,” explained Kenneth Merritt, the company’s vice president of OEM sales. “Either we could hire a full-time logistics person to manage the movement of the freight from point to point or use freight forwarders who take possession of the customer’s freight in the U.S. and manage the freight from that point forward.”
Bushwacker prepares all of the primary documentation, then delivers the product to an overseas hub within the continental U.S. A freight forwarder takes it from there, handling all of the insurance, logistics and additional export documentation required to deliver the shipment overseas, through customs and to the end customer.
For Bushwacker, freight forwarders offer an ideal logistical solution because they understand the culture, customs regulations and required documentation for any given country. They will also work with you to obtain the proper packaging and insurance for your cargo.
“We didn’t have to go into any specialized training,” Merritt said. “We haven’t had to go out looking for freight forwarders so far, because all the customers we’ve dealt with already have one that they’ve been working with.”
Your shipping consultant will also advise you in the design and labeling of packaging that stands up to varied transportation methods and customs requirements.
Increasingly, international carriers such as UPS are entering the freight forwarding business with services like UPS Worldship.
“When you think of UPS, traditionally you think of the brown truck, but UPS has evolved over the last 100-plus years,” explained Kristin DeBates, UPS corporate marketing manager for the automotive segment. “When we talk about international, we ship small packages, we ship international air freight, we offer ocean freight—and all of those services come with the tracking that customers have known and enjoyed with the carrier. They also come with shipping solutions that help facilitate not only the creation of labeling but any of the international documentation that’s required.”
Those solutions include a suite of software that gives the customer virtually complete oversight of invoices, estimates of duties and taxes, shipping and tracking.
“We’ve got the tools that help you create the information as well as the relationships with customs to help send that information electronically so that your packages are pre-cleared before they actually arrive in the destination country,” said Debates, who believes that an integrated carrier like UPS offers several advantages over traditional freight forwarders, especially for lower-volume exporters. “Integrated carriers own their own assets, where freight forwarders are typically brokers identifying available space [on planes and ships].”
Moreover, an integrated carrier is frequently more “scale-able” and can handle everything from small package delivery to door-to-door freight shipment that can bypass distribution centers, often delivering significant savings through combined domestic and overseas programs. (The complete UPS worldwide services were detailed in “An Automotive Opportunity,” SEMA News, October 2011, pp. 128-129.)
FedEx Trade Networks
Like UPS, Federal Express (FedEx) offers a variety of logistics programs addressing the diverse export needs of small and medium businesses, no matter the shipment size (i.e., full container or less). According to the company’s press materials, its top-of-the-line program, Trade Networks, provides volume exporters with worldwide freight forwarding services by “whatever modes and carriers most effectively support your cost and scheduling needs.” The program integrates international freight forwarding, customs brokerage and trade and customs advisory services, and it is designed to “replace the traditional maze of multiple distribution channels” for both air and sea shipments.
A small aftermarket business that’s new to the complexities of export logistics will especially appreciate FedEx’s Electronic Trade Document program, which includes hands-on customer education in the filing of customs documents electronically.
“The way they set it up for you, truthfully, you can take someone off the street and teach them to do it overnight,” said Trudo, whose company recently turned to the FedEx model. “FedEx will install all of the equipment, software, paperwork, everything, and will train everyone and be here for the first two weeks of every shipment we do at their cost.”
Thanks to this system, one in-house person at SCT can oversee all of the company’s international shipping.
“With everyone we ship to, we ship direct to their facilities, and we’ve done our homework on duties and tariffs. We know our way around [logistics] and what’s the best and most cost-effective way to do things,” Trudo explained.
Plus, to save further costs, SCT has standardized its packaging to meet the requirements of every destination it ships to.
The point is, with a slow-recovering economy at home, many specialty-equipment manufacturers are finding growth in new markets abroad. While shipping globally certainly has its share of pitfalls, Bushwacker, SCT Performance and Advanced Performance Parts have all realized success through the variety of resources available. From integrated carriers, to freight brokers, to freight forwarders, the solutions are ready and waiting. Despite the intimidation factor, exporting your aftermarket parts globally may just be easier than you think.