Logistics And Frieght Forwarding

Shipping by sea cheaper than ever

GoGroup owner Murray Painter says international shipping rates are the most competitive he has seen. PHOTO/SUPPLIEDGoGroup owner Murray Painter says international shipping rates are the most competitive he has seen. PHOTO/SUPPLIED

As export volume grows Te Mata Figs is switching to shipping containers for its fig-flavoured fare, following several years of flying them overseas.

Director Murray Douglas said air freighting to Australia was cheaper than sending it to many parts of New Zealand by road, despite an out-of-town repacking.

“If you ship by air out of Hawke’s Bay no air cargo containers can be taken out of Hawke’s Bay Airport because the planes are too small,” he said.

“So you actually have to send it up to Auckland and then repackage it into an air cargo container, which is another cost.”

Shipping by container was a lot cheaper when volumes rose, despite extra costs due to extra regulatory interest. Small volumes sent by courier were seen as less of a smuggling threat than containers, so the bigger the load the bigger the paper war.

“The cost structures are distorted by the inspection costs at each end, such as Customs and quarantine, so you have to ship decent volume so you can reach your margin.”

The figgery wasn’t yet receiving overseas orders big enough to fill a single container and was looking for other exporters to share a container, a common practice in the wine industry.

“The problem with sharing is not so much the container itself but how you unpack it at the other end, because you have different companies dealing with it.”

Te Mata Figs has handed their shift in shipping to Murray J Painter, a licensed Customs broker and shipping agent with Hawke’s Bay company GoGroup. He said shipping prices were currently very good.

Continued below.

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“It is probably one of the most competitive times that I have seen for international freight rates,” he said.

He said South Korea’s Hanjin Shipping, one of the world’s largest container shipping companies, recently went into receivership in a world oversupplied with ships.

“It is so expensive to run those very big ships so you have to make sure the vessels are at capacity all the time, and of course a lot of them are not. Trade fluctuates, depending on the economic flows and all sorts of stuff like earthquakes.”

Freight costs were lessening as the main expense, particularly for importers.

“All of the extras: the transit, the trucking, Customs clearance, your port-handling charges, Customs clearings, security charges – all these other costs are becoming greater than the freight itself.”

Container shipping was not an option unless goods weighed a tonne or measured a cubic metre.

“You have a dozen or so shipping lines serving Napier which makes it reasonably attractive,” he said.

“Most of those lines will go to the majority of destinations throughout the world.”

He said newcomers to the world of shipping should use a freight forwarder and not deal direct with shipping lines, which could be catastrophic for perishable goods stranded on a foreign wharf until a form was received.

“Unless you are experienced in what you are doing it will end up costing you a huge amount of time and if you do things wrong the penalties can be pretty severe.

“The freight forwarder and a Customs broker have that knowledge and work with all the shipping companies and know all the procedures and documents and rules and regulations around the product that is going overseas at they can advise you in that regard.”

Customs brokers deal solely with the Customs requirements and many freight forwarders combined the roles “and deal with the entire supply chain from the point of origin to the destination”.

Gone were the days when shipping containers could be loaded and unloaded at your own premises.

“You have to be registered as an exporter and have the ability to load and seal the container, which means the goods have to be in a secure environment and, when loaded, sealed on the premises.

“This came out of out of 9/11 when the Americans wanted no potential for either contraband or explosives in a container. They put the onus on to the exporting countries, through Customs departments, to make sure these processes were in hand. So there’s a fair bit to do.”

Many companies chose to outsource to third-party logistic companies such as contract bottler Wineworks.

“Wineworks holds wine in tanks for you, then bottle it, load the container on site and send it to the port, saving you having to do all that work yourself and of course they know all the rules and regulations around wine exports.”

The “high end” of shipping goods in New Zealand was Kotahi, a freight management company established in 2011 between Fonterra and Silver Fern Farms, which negotiated freight rates direct with shipping lines or chartered ships.

He co-founded the Export Academy in 2008 in Havelock North, the first institution of its kind in the country offering qualifications in the art of selling goods offshore.

“We found, particularly after the deregulation of the apple industry, there was a huge number of new exporters trading internationally without the actual knowledge to do that well.”

The academy helped exporters learn about exporting “before they jump into some of these huge orders that tend to arrive from places like China”.

“So we went from being an actual provider of services to a trainer. That has been quite popular and we have probably touched base with every exporter of primary or manufactured products in Hawke’s Bay.

“Most of the business that we do now is outside of Hawke’s Bay, which is a bit of a shame.”

Importing is also covered – he said a component of exported goods was often imported.
China was “very tricky” for exporters with a lot of rules, regulations and “confusion” at ports unfamiliar with New Zealand freight.

“The free trade agreement with China is great and saves New Zealand a huge amount of money/duty going into China, but when it comes down to the practicalities of documentation there is a lot of interpretation of rules that get lost in translation between the parties.

“A lot of my time is advising people on Chinese trade because they run into so many difficulties whereas it should be quite straightforward.”

Hawke’s Bay Chamber of Commerce CEO Wayne Walford advises a trip to China before shipping goods there, to confirm there were good people with local knowledge receiving goods “to minimise any opportunity for disruption”. He suggested first-time exporters share a container or target smaller markets such as Taiwan or Singapore first.

“China is a big market and if it is too big for you then don’t go there.

Maybe you would be better off in somewhere a little bit smaller. The Chamber was one of several organisations with a network of experienced exporters.

“There are all sorts of opportunities and all sorts of people that are keen to help people get to grips with the process and where they stand if they do get a £5 million order. It is not a time to be shy and think you are getting one over the others.”

The Chamber provides exporters a Certificate of Origin, a document attesting goods are wholly produced/processed/manufactured in New Zealand.

Export NZ Hawke’s Bay executive officer Amanda Liddle advises potential exporters to check out New Zealand Foreign Affairs and Trade’s online FTA Tariff Finder. Designed to help exporters maximise benefits from New Zealand’s Free Trade Agreements, it holds very detailed information on many categories of goods and, if tariffs apply, when they will reduce. For example birds of prey in Peru attract a 9 per cent tariff but only in the first year of the Free Trade Agreement.

She said Export NZ was a member organisation with two main roles, lobbying and education.

Online sales meant many companies were skipping the usual business model of companies gaining a firm foothold in the local market before exporting.

“I’ll get a phone call saying, I have an online website and have been selling domestically but I’m getting all these orders selling internationally.

What do I do?

“We are not consultants – we don’t say, this is what you do.

We can put you on a pathway and introduce you to lawyers for IP protection or help to set up sales contracts and market validation.

If there is any funding from government we can set you in the right direction.

“We put people on the right track, get them to make sure the foundation is stronger at the bottom so as you scale up you are in the right position to be able to grow.”

- Hawkes Bay Today[4]

References

  1. ^ Setting up a start-up (www.nzherald.co.nz)
  2. ^ Do your sums for tax credit top-up (www.nzherald.co.nz)
  3. ^ Growth to ‘crack a nut’ for long-term unemployed (www.nzherald.co.nz)
  4. ^ Hawkes Bay Today (www.hawkesbaytoday.co.nz)



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