In the previous post – S – Strategies for Manufacturing Your Product Overseas – I suggested a three-step process towards overseas manufacturing: manufacture in the US if you can do so cost-effectively; consider Mexico if US is not practical; choose overseas if US or Mexican manufacturing cannot work.
In this post, let’s discuss the third option: manufacturing overseas. I will use examples from China since that is my experience, but the process would be similar for Vietnam or Malaysia or other exporting country in Asia.
It is helpful to understand the key elements of importing. There are four parties involved in every import shipment from overseas, you, the importer and the following 3 partners:
• Your overseas manufacturer
• A freight forwarding company
• A customs broker to represent you before CBP (US Customs and Border Protection)
Your manufacturer will typically deliver your finished goods not to you, but to the nearest port city to the factory. In my case, manufacturing in southeastern China, that was Hong Kong, so I will use examples specific to my situation.
My manufacturer gives me a “delivery” date for FOB Hong Kong (Freight on Board). But, Hong Kong is a long distance away from Dallas, doesn't seem like a delivery to me. That is where my freight forwarding partner comes in: they get it moved from a warehouse in Hong Kong onto a ship bound for Port of Long Beach, CA and; upon arrival in Long Beach, transfer the cargo onto a truck for destined to Dallas – called IT for “inland transit” in the parlance of logistics.
But, my freight forwarder must obtain approval from CBP prior to loading my cargo on a ship in Hong Kong. This is where my customs broker partner comes into play. The customs broker works with the manufacturer and my freight forwarder to file an ISF (Importer Security Filing) with CBP. When all of the necessary information is provided from the bill of lading and the invoice (of amount I paid the manufacturer) into the ISF, CBP gives permission and the ship may be loaded within 24 hours of that approval.
The ship then spends about two weeks “on water” from Hong Kong to Long Beach. Upon arrival in Long Beach, my customs broker again works with CBP to obtain clearance. The cargo can clear customs in either Long Beach or in Dallas, I usually choose the latter.
The last leg of the logistics is the IT transport from Long Beach to Dallas. Upon arrival at a warehouse in the Dallas, I rent a truck to retrieve my shipment, completing the long international logistics chain. Your process would be quite similar except you might have a different port of exit (from China or your exporting country) and US entry port.
How do you find a good freight forwarder and customs broker to work with?
In my case, I asked the manufacturer who they recommended for freight forwarding. I called the recommended freight forwarder and asked them a barrage of questions until I understood the process. I then asked them who they liked to work with as a customs broker. I then called the recommended customs broker and again asked many questions. This worked out very well for me and I continue to use the same partner companies 6 years later.
You can also do a Google search. One place to find a customs broker is at National Customs Brokers and Forwarders Association of America.
In the next post, we’ll discuss in more detail a strategy for the logistics of importing: U – Understanding and Planning Importing Logistics.