The Unknown Effect of the New Inbound Placement Fee
How It Impacts Your Supply Chain and What You Can Do About It..
At Proboxx, we recently encountered a concern from one of our clients that shed light on an important issue affecting supply chain costs.
The client's supplier in China was debited with significantly higher local fees than in the past, causing the supplier to incur a loss.
This unexpected cost increase stemmed from the new inbound placement fee introduced by Amazon. Let's break down why this happens and how you can address it effectively.
Understanding FOB (Free On Board) Terms
When commercial terms between a seller and their supplier are based on FOB, the supplier's responsibility is to cover all local charges in China on behalf of the seller. These charges typically include:
- Pick-up
- Export customs clearance
- Shipping line charges
- Other required certificates (e.g., commodity inspection/CIQ certificate for wooden products)
Before the New Inbound Placement Fee
For a shipment containing 100 boxes delivered to a single destination, the cost breakdown was as follows:
- Export clearance: $50-55 per shipment
- Commodity inspection: $40-50
- CIQ certificate (if required): $130-150 per shipment
After the New Inbound Placement Fee
With the introduction of the new inbound placement fee, Amazon now splits the 100 cartons into 3-5 different destinations.
Each shipment requires the same process, meaning:
- Export clearance and commodity inspection are needed for each destination, resulting in the same charges whether shipping 2 cartons or 200 cartons.
The Result: Increased FOB Charges
Suppliers are unwilling to "absorb" these new fees on behalf of the client.
Consequently, the FOB rate increases significantly due to the need for multiple clearances and certifications. Here's how you can navigate this challenge:
1. Acknowledge and Understand: Recognize that the increased costs are a direct result of the new inbound placement fee. Awareness is the first step in addressing the issue.
2. Negotiate with Your Supplier: Communicate the problem to your supplier and negotiate new FOB charges. It’s important to ensure they understand the impact of the new fees and work towards a mutually beneficial solution.
3. Switch to EXW (Ex Works) Terms: By changing the terms to EXW, you can have your freight forwarder charge you directly instead of relying on the supplier. This shift can help in better managing and understanding the costs.
4. Consolidate Shipments: If possible, consolidate shipments to one destination while paying the new inbound placement fee. This strategy can help in reducing the overall FOB charges by minimizing the number of required clearances and certifications.
Why This Matters
The implementation of the new inbound placement fee has introduced complexities that sellers need to manage proactively.
Not only does it impact cost structures, but it also necessitates a strategic approach to shipping and logistics.
By understanding and adapting to these changes, sellers can maintain control over their supply chain costs and continue to operate efficiently.
Practical Solutions to Mitigate Increased Costs
Now that we've covered the why and how of increased FOB charges, let's delve deeper into actionable steps you can take to mitigate these costs:
Solution 1: Acknowledge and Understand
The first step is to fully grasp the impact of the new inbound placement fee on your supply chain. This understanding will allow you to make informed decisions and effectively communicate with your suppliers and logistics partners.
Solution 2: Negotiate with Your Supplier
Open a dialogue with your supplier to explain the issue. Suppliers might be willing to renegotiate terms or find ways to share the additional costs. Building a strong, transparent relationship with your supplier is crucial for navigating these changes.
Solution 3: Switch to EXW Terms
Switching to EXW terms means that you, as the seller, will take on the responsibility of the local charges in China. This change allows you to have more control over the costs and potentially find more cost-effective solutions through your freight forwarder.
Solution 4: Consolidate Shipments
Whenever possible, consolidate shipments to reduce the number of destinations. This strategy helps in minimizing the duplication of clearance and certification costs.
By paying the new inbound placement fee, you can streamline your shipping process and lower overall expenses.
Let's Talk Solutions!
The new inbound placement fee may pose challenges, but with the right strategies, you can manage and even mitigate these increased costs.
Ready to Take Action?
To discuss the impact of the new inbound placement fee on your supply chain costs and explore tailored solutions for your business, book a call with us HERE.
We'll work closely with you to ensure your logistics are as cost-effective and efficient as possible.
Don't let unexpected fees disrupt your business. Let's tackle this together and keep your operations running smoothly.