how-fba-works

Amazon is the next gold mine and there are countless of people becoming millionaires and living their dream through the booming Amazon business. I believe that a great business is only great when one has a vision and are heading in the right direction. Finding major resources like manufacturers’, suppliers, and trading companies have been made so easily through the growing commerce company Allibaba; however, no one pays focus to the logistics side of the international business. On average, logistics adds up to 60 percent of a product landing cost to the ultimate customer’s hands: shipping, warehouse, duty, employees handling, courier service to the customers and many more. As business owners, we find a good CPA to help us reduce our yearly tax but no one looks for a good logistics company to help reduce the 60 percent logistics cost.

In the international trade, other than finding a great manufacturer and trading company to work with, it is highly important to find a great logistics company to handle your cargo. A logistics provider should be number 1 on the list when a company does business internationally.  There are a lot of questions about moving cargo from the factory to Amazon FBA, so I would like to write a simple guide on how to do it. Please remember, this is a simple guide as each company’s cargoes are different so they must be handled differently.

Step 1: Understand Trade Term FOB and EXW
You find a product that you want to buy and sell on Amazon. You start to exchange e-mails with the manufacturer. They will have a minimum amount that you will need to purchase, and they will use trade terms such as EXW or FOB. It is very important that you understand these terms because they will respect you more, and you will have a better insight of what you are dealing with.

Buying under EXW: As a buyer, you will be responsible for all transportation costs from the factory to your warehouse. Ask the seller for the warehouse address if you pick EXW.

Buying under FOB: The seller will take the goods to their closest port. You, the buyer are responsible for the transportation costs from the port to your warehouse.

There are other trade terms such as CFR, CIF and etc but I don’t recommend them as they are very tricky and I have experienced people get ripped off because of hidden fees.  Link to other Inconterms at Wikipedia and a more detail explaination.

Step 2: Know what you are importing
What you are buying and planning to sell might be a great price but you have to consider the duty (import tax). The US Government has 19.5 Trillion dollars in debt so they want your import duty. Get the HS Code, picture of the product from the factory, and ask the freight forwarder to look up the duty percent for you. Some products might need FDA, DOT or other agencies for it to enter the USA so please check with your freight forwarder if these products require additional paperwork before committing to buying.

Step 3: Transportation by Air or Ocean
Now that you know your trade term, how much you want to buy and the duty, it is time to decide if you want to ship by air or ocean.
Express Service: DHL, FedEx, UPS and ect. Use these services when your cargo is under 200 KGS.  If you do triangle business, where you purchase from China, live in another country and sending your product to the USA, I recommend that you use a freight forwarder to receipt your package before sending it to Amazon FBA.  The freight forwarder can inspect your goods before sending to Amazon FBA, store it and take care of duty for you with a small fee.
Air Freight: This is used for perishable goods, when you run out of inventory or on high end goods with a big margin. The more you ship, the better discount you get but air freight is not recommended for long term business since it can cost 4 or more times the amount of ocean transportation.  Transportation time is about 2-5 days.
Ocean LCL: Ocean Loose Cargo Load. You want to use this service when you don’t have enough products to fill a 20’, 40’, 40’HC and 45’ container. For example, if you only have 3 pallets, you want to use LCL because it would not be a wise idea to go get a 20’ to put 3 pallets inside unless you want to go out of business on your first shipment. LCL transportation time is about 14 to 18 days.
Ocean FCL: Ocean full container load: 20’, 40’, 40’HC and 45’. This is where you want your business to reach. Ideally, FCL should only be used once you reach more than 18 CBM for your cargo. CBM is the measurement of how big your cargo is. If your cargo is below 18 CBM, use LCL. Transport time is about 14 to 18 days.
Example and an ESTIMATE: One 40’ can take up to 22,000 KGS of cargo and can cost $1000~ from China port to USA port. Air cargo can cost up to $88000 from airport to airport.  Now you see why only 3 percent of the world cargo is moved by air. Air shipping takes all of your profit.

Step 4: Getting an annual bond
If you are planning to import more than 3+ times per year, get an annual bond. It is a one-time fee but you will save $100 to $150 per import shipment. An annual bond is like insurance to US customers that if you abandon your cargo and they have to destroy it, they will go after your bond to recover for all their labor and fees. If you are a foreign company, the freight forwarder can still clear your cargo and get an annual bond for you, because Amazon will not act as the Importer of record.

Step 5: Reach out to a freight forwarder and ask for a quote
If you like people to give you details when you ask questions, do the same thing when reaching out to a freight forwarder.   These are the things you need to give your freight forwarder when asking for a quote:
1) Trade term. If FOB, give them the port name. If EXW, give them the factory’s address
2) Will this be moved by Air, ocean FCL or LCL?
3) How many cartons for your first shipment, or provide an estimate.
4) Provide the dimensions of the cartons or just the total CBM
5) Total Cargo weight
6) Provide the HS Code for the cargo, you can get this from the factory but many times I have seen factory give the wrong HS code and the duty comes out higher so you will be better off getting the picture and the name of the product.
7) Do you have a bond or do you want to purchase a bond? Your freight forwarder can help you obtain a bond.
8) Your Amazon FBA location or the location you want your cargo to go to in the USA
9) Will the cartons have FBA labels on them already or do you need it to be labeled here in the USA by the freight forwarder?

Step 6: Being Lazy with a good freight forwarder
If you feel like step 5 is too much, pick up the phone and ask if the freight forwarder is interested in working with you. Ask them if you can CC them directly into the e-mail with your supplier.  This will save you a lot of time and the supplier can work with the freight forwarder to deal with number 1 thru 6 in step 5. Some freight forwarders will not do this so do not be disappointed.  An average trading company in the USA import 10 to 20s 40′ container per month so now you have an idea why some freight forwarders don’t want to waste their time with small shipment.

Step 7: Marketing
From personal experience, I have handled many different types of cargo and worked with many sellers on Amazon. All I can tell you is that you should be focusing on marketing and promoting your product. This is where 100% of your time should be invested.

Conclusion:
Amazon is the next gold mine which can be difficult at the start but with the right guidance and service provider, you will mine this gold mine. My article is just a general guide because everyone’s cargo needs to be handled differently.  If you are interested in my service and have additional questions, you can contact me at the e-mail below or call me directly.

Jimmy Tran
Jimmytran@worldcraftlogistics.com
TEL: (909) 632-1643