If you’re shipping goods to a buyer overseas, you’re probably looking to reduce costs across your supply chain. There are many ways to do this, including organising your shipment through a cross trade routing.
Below, we’ve put together a brief beginner’s guide to cross trade shipping. We’ll outline what a cross trade is, why you should use it, how to use it and what you should keep in mind when deciding to ship using cross trades.
What are cross trades?
A cross trade is a shipment organised between two countries – none of which the seller is locally based in. They’re also known as foreign-to-foreign shipments, third party shipments or – more commonly – triangle shipments.
Think about it this way: you’re selling a product to someone in Japan, but your product is manufactured in China. A cross trade transaction involves shipping your product directly from China to Japan.
It’s called a ‘triangle shipment’ because there are three countries involved in the transaction – the country of origin, the destination, and your business in Australia.
Cross trading has become very popular as more and more Australian businesses enter into international markets.
Why would I use a cross trade?
There are many reasons businesses use cross trades – all of which can end up saving you money in the long-term. Here’s why exporters should use cross trades when selling their product overseas:
- Accessing new markets – cross trades are a great way to break into a new market without having the extra expense of on-selling your product from your local country once it’s already been imported.
- Lower supply chain costs – the supply chain is one area where so many costs can be streamlined. Cross trades completely remove the need to bring goods into the seller’s country, which means removing freight costs, duty costs and taxes associated with initially importing the product.
- Less transit time – why export to your seller’s country if it’s halfway across the world? Cross trade shipments can reduce transit times, meaning greater cost savings for your business (imagine the time that can be saved by shipping from China to Japan, rather than from China to Australia and then on to Japan).
- Efficiency in the supply chain – Cross trades bring production and stock closer to the final destination, as the whole supply chain becomes decentralised.
- Using a local forwarder – Rather than trying to find someone overseas to manage a cross trade for you, you can deal with your local forwarder in your own time zone, who will manage the complexities of each country for you whilst you keep one local contact.
How do I organise a cross trade?
Organising a cross-trade is easy if you just follow these simple steps.
- Contact International Cargo Express, and provide us with details of your goods, the manufacturer and the buyer. Also let us know the size of your consignment and if you’d prefer to ship your goods by sea or air.
- ICE will then give you a quote of how much this is going to cost you. If you’re happy with the quote, you’re good to go.
- We will then liaise with all overseas agents and make all the bookings to co-ordinate your shipment. All documents will be centralised through us.
Note that the commercial sell rate of your products will be the commercial invoice used on entry to the destination country (not your manufacturer’s invoice).
Also, the Bill of Lading will specify the client in Australia as shipper (a switch bill of lading will used to replace this information from the original bill of lading). For a brief discussion on the types of bill of ladings available, see our blog on the topic.
What should I be aware of when organising cross trade shipping?
To ensure your shipment goes smoothly, there are a couple of things you should keep in mind:.
- Make sure you tell your forwarder if you want your shipping to be neutral. This means we will withhold all the details of your manufacturer from your buyer (thereby stopping your buyer from contacting the manufacturer directly to purchase the product).
- Consider an adequate marine insurance policy. You don’t want to sell your product, only to discover that something on the ship has gone wrong (loss or damage) and you have no insurance to cover it!
- Ensure you use the right incoterms to suit your shipment (Incoterms are the international commercial terms that allocate risk between a buyer and seller in an international shipment).
- Understand the benefits of any applicable free trade agreements. If there’s an agreement between the country of origin and the destination country, use it to your advantage!
- Remember there will be three freight forwarding parties involved all co-ordinated through your one contact (namely, us).
Using an expert freight forwarder to manage my cross trade
International shipping can be a bit of a minefield.
Cross trades, in particular, can be complex. Your forwarder will be able to identify rules between the different countries and how they affect your cargo.
You can pick up the phone or meet with us in your time zone to coordinate your shipping, giving you complete peace of mind. Give us a call on 1300 227 461 to chat with one of our friendly experts or leave a comment below and we’ll be in touch!