U.S. trade with China is booming, but there are issues that continue to linger such as the US trade deficit and China’s trade surplus, China’s fiscal policy keeping their currency artificially low compared to the US dollar, intellectual property, piracy, counterfeiting, US debt levels and China investment in US treasuries, as well as protected markets, US export controls, the investment barrier, port closures, shipping delays and seasonal shipping schedules.
Because of these issues and other differences between the two countries, many shippers struggle to do business with China. Below are seven key lessons from a veteran freight forwarder that will help shippers successfully ship to and from China:
Lesson #1 – Get the Right Partner in China
- Commodity Knowledge: Since there are frequent trade issues for certain commodities, your Chinese partner must understand all of the intricacies of import/export regulations, tariffs and legal requirements.
- Issue Resolution: Your Chinese partner should not only understand the shipment commodity details and requirements, they must also be able to advocate on your behalf when issues arise.
- Personal Connections: In China, it is very helpful to have a Chinese partner who has personal connections within the government / business community. These connections will help improve communication, mitigate risk, facilitate shipment delivery and expedite problem shipments.
Lesson #2 – Business Relationships Are Personal
- Relationships Matter even more in China than in the US. In the United States, business relationships develop while working together.
- Friends First: In China, it is customary to build relationships prior to doing business together. If everyone gets along well, a business relationship may happen. Since this is very different from the US, many companies stumble when they begin working with China.
- Visit China: To develop the necessary relationships, it is important to visit China. Since most firms doing business with China will skip this step, your extra effort will be even more appreciated by your Chinese partners.
Lesson #3 – Service Is More Important Than Low Prices
- Not a Truck: Many shippers treat over the road transportation as a commodity – meaning all the trucks and companies are the same so go with the lowest price. That approach won’t work with freight forwarding.
- China freight forwarding is a high touch, high value service that requires significant expertise, coordination and resources. Trying to save a little money by hiring an inexperienced company will end up costing your company money.
- Teaser Rates: Some freight forwarders will quote teaser rates to win customers and then add in extra fees and charges after the fact. Because international shipping is so complex, there is opportunity for unscrupulous behavior.
Lesson #4 – Experience Trumps Company Size
- Sales Talk vs. Operational Know How: Many brokers and 3PL salesmen claim to have the ability to do China shipments. Calling a contact and double brokering is very different from real experience and expertise.
- Size Doesn’t Matter: Even some of the largest 3PLs don’t do a lot of China business because they specialize in domestic transportation.
- Hire an Expert: It is critical that you hire an expert on China shipping. Find a person who currently has customers with China shipments. International shipping to China is much more complex and complicated than domestic shipping.
Lesson #5 – Get the Details Right
- Plane or boat? An experienced freight forwarder will recommend the most appropriate way to ship your freight. Air freight to China is much faster, but much more expensive. Typically, only time sensitive shipments are shipped by air freight.
- Details Matter: When shipping to or from China, there are lots of details. Your 3PL needs to effectively manage paperwork, customs clearance, incoterms, trucking companies, shipping schedules that may change, along with changing requirements from the shipper and consignee.
- Process: Good freight forwarders will use a process for coordinating details, activities, timing and communication.
Lesson #6 – Cultural Differences
- Avoid the Pitfalls: A good freight forwarder can help you steer clear of the cultural differences that often sink Chinese/U.S. business deals.
- Losing Face = Losing Business: The Chinese are typically non-confrontational. Overt conflicts and situations that embarrass others are considered losing face. Doing business after someone has lost face will be difficult or even impossible.
- Relationships are key in China and tough negotiations, dominant or aggressive behavior will not be perceived favorably.
- Contracts are highly valued in the US, but they are treated differently in China. Chinese business people will often want to move slowly and see how the relationship is going.
Lesson #7 – Great Communication from Start to Finish
- Explaining the Process: In the beginning of a relationship, it is important for the freight forwarder to communicate the process to the shipper.
- Paperwork: Getting the paperwork completed correctly is a daunting job, but a good freight forwarder will manage the project with a check list – not a dozen piecemeal requests.
- Status Updates: The freight forwarder should provide status updates on a consistent basis without being asked.
- Problem Resolution: There will be problems on occasion, the freight forwarder must communicate effectively to solve the problem and keep the customer in the loop.
Daniel Cser, a Detroit Michigan Agency Owner with ICAT Logistics, Inc. has over 30 years of experience in logistics and significant expertise as a China freight forwarder. Established in 1993, ICAT Logistics has become one of the leading agency-based freight forwarders in the U.S. by providing customizable shipping and logistics solutions for its customers. For more information about ICAT Logistics, please visit www.icatlogistics.com.