Exporting From Thailand

[dsukhumvit]

Hi,

I have the chance to perhaps start selling some Thai products overseas. I have yet to register a company, so I am guessing I will try to handle it from an offshore account if possible.

In any event and especially if I can't operate from offshore, how do I figure the additonal costs? For example, you are quoted one price on a batch of shirts for wholesale and another FOB. What figures into the FOB price and is there a decent normal average so you have some talking points with a buyer?

Sorry for the bother but any informaiton would be greatly appreciated.

dsukhumvit

[Richard Hall]

Actually, FOB (free on board) cost can involve a lot such as

- export packaging

- proper labelling

- issue of packing list indicating weight and volume

plus cost by the forwarding company such as

- customs formalities

- national transportation charges (from the factory/point of sale to the harbor/airport)

- gate charge

- handling charges

- CFS charge (per cbm)

- THC charge (per cbm)

- B/L fee carge

on top of this 7% VAT.

Actual cost depend on the following criteria:

- Total weight and/or volume of the shipment

- Means of transportation (airfreight or seafreight) - Handling seafreight shipment is more complex and therefore FOB cost are usually higher than those for airfreight.

- Shipment of LCL (less than container load) or FCL (full container load)

Because there are so many aspects coming into play it is basically impossible to come up with something like an average or percentage.

Usually when providing a FOB price to a potential buyer is refers to one unit/piece of merchandise. Generally, the bigger the shipment the more can the total FOB cost be distributed. Since you mentioned T-Shirts please keep in mind that many countries (European Union but also the US) have a quota agreement in terms of garment. Quota needs to be acquired (bought) from Government. If a shipment is carried out without taking the quota regulation into consideration and you even manage to get the shipment out of Thailand it may be confiscated by the customs authorities at the port of destination.

Just to give you a true life example of FOB cost for a shipment we just carried out:

Shipment to the USA by boat (LCL)

33 cartons

Total gross weight: 518.68kgs

Total volume: 1.910cbm

Merchandise already properly packed for shipment (cartons suitable for export) by the factory. Just needed to carry out quality control, label the boxes as per the instruction of the client, make out invoice and packing list. We do not consider our own time and use of material into the calculation scheme.

Total FOB cost charged by the contracted forwarder: THB 6,670.65 including 7% VAT.

Total number of merchandise units in this shipment: 3,680 resulting into FOB cost of THB 1.81 per piece. Surely no problem when your wholesale price per unit is THB 200 (FOB part 0.9%) or more but if it is just THB 20 than this is quite a chunk at 9%(!!).

Afterall, FOB can be neglectable or indeed very significant depending on the particular circumstances.

Hope this helps.

[dsukhumvit]

It helps a lot. Thank you. I must admit I drug my lazy self to google and did a search and learned quite a bit, but actual experienced advice is greatly appreciated.

Kind Regards,

dsukhumvit

[NedKelly]

Very interesting Mr richard ! Thanks for your info. I had similar queries. Just wondering also what the actual cost of your shipment was ? (yes I have no idea) I understand that FOB is free on board, but is the the cost of the actual shipment into port.

The information about garmnets is important. In Australia there is a quota for cotton goods and as you mentioned, you have to buy part of the quotas from the authorities to be able to import. I hear that some big companies buy up large chunks of the quotas but never actually use the whole amount. Just want to protect their own industry I guess.

Ned

[Richard Hall]

Very interesting Mr richard ! Thanks for your info. I had similar queries. Just wondering also what the actual cost of your shipment was ? (yes I have no idea) I understand that FOB is free on board, but is the the cost of the actual shipment into port.

The information about garmnets is important. In Australia there is a quota for cotton goods and as you mentioned, you have to buy part of the quotas from the authorities to be able to import. I hear that some big companies buy up large chunks of the quotas but never actually use the whole amount. Just want to protect their own industry I guess.

Ned

Dear Ned Kelly,

In case of the previous example the indicated FOB costs included pick up at my premises, transport to the port, customs clearance, issuing the shipping papers putting the merchandise on board of the boat.

The actual transportation cost from port to port or airport to airport is a different issue:

The freight rates depend on the aspects:

- Weight/Volume

- Distance (port of destination)

Seafreight is in terms of the freight rates per ton or cbm quite reasonable. For example something like US$ 50 or US$ 60 per ton/cbm from BKK to Hamburg, Germany. Less for shorter, more for longer distances. 1 ton/cbm is always the minimum for the calculation even if your shipment is less. Whether weight or volume applies is a matter of what is being shipped (in case of lead the weight is base for the calculation while in case of feathers it will be the volume) and to the benefit of the freight forwarder. For FCL (full container loads) most forwarder offer a flat rate including all in all (transportation AND FOB charges). CIF (cost, insurance, freight) for a 20' container from BKK to Hamburg is somewhere in the area of plus/minus US$ 1,500 and for a 40' container US$ 2,500. These are just guidelines and may differ from forwarder to forwarder.

Airfreight

Here it really goes by weight

Example

0 - 5kg: THB 1,500 per kg

6 - 44kg: THB 250 per kg

45 - 99kg: THB 115 per kg

100 - 499kg: THB 110 per kg

500 - 999kg: THB 101 per kg

Other charges that can occur in addition:

Crisis surcharge : Baht 4 /Kg.

Fuel surcharge : Baht 8 /Kg

AWB and T/C charge : Baht 400

Handling Charge (All-in) : Baht 1,200 (Only weight is less than 100 Kg)

PLEASE NOTE THESE ARE JUST GUIDELINES - DON'T NAIL ME ON THESE FIGURES! This is just an example of the past and actual rates differ from forwarder to forwarder and the airline transporting the shipment (the rates can differ quite a bit!).

Generally to get an up-to-date offer you have to provide the forwarding company with the following information:

- Kind of merchandiese to be sent (hazardous or non-hazardous)

- Total weight and volume (gross)

- Port of destination

- Means of transportation

Also it certainly depends where the merchandise you want to get shipped is located. If already in Bangkok it is surely quite cheaper than having the goods moved from somewhere off the countryside first. Generally, just to be on the safe side it is always better to calculate the extra costs more generously than too tight. Make sure you build a buffer into your calculation scheme last but not least also to cover for the risk of currency fluctuation. Remember between extending an offer and foreign funds are get actually transferred into your account quite some time may go by and in the bad case a weakening US$ can cut badly into your margin.

Quotas: It is kind of a tricky subject and sometimes not easy to get the quota you like to. When you apply you have to provide evidence that you are actually in the position and/or have the intention to export. Let's say in January you apply for the quota for the entire year but who does actually know in advance how businesss will develop. Therefore, if you have the chance, it is surely much better to overestimate rather than running short during the course of the year. Imagine you used up your quota after 6 months already and orders keep coming in. Now you have to start hunting additional quota or accept being unable to make the deal. Imagine you have the goods, the price is accepeted by the customer but you can not supply that million t-shirts because you do not possess the appropriate quota. This will surely be a real nightmare for the wholehearted businessman.

Anyway, good luck for your endeavours. May the force, whoops, the quota be with you!

Richard

[BlackJack]

hello

just to add a bit regarding quota etc

the quota situation around the world is changing as of Jan 1 2005 - after this i believe some tariff system would be put in place to stop China dumping on the market and killing off small factories

We act as a head garment sales office for several countries and place orders in one of those countries depending on the quota needed for the destination country -for example Vietnam was quota free to USA until May 1st last year - then USA bought in quota. However Vietnams quota to EU was increased 75% - so you win some and loose some

to Australia we use Bangladesh as its quota and duty free - as it is considered a poorer country and needs assistance

some countries even trans ship to a quota and duty free country - sew on labels that state country of origin is maybe Africa that is under AGOA D&Q FREE status then ship free to USA

illegal but it happens all the time

Also the quota was sometimes bought in the future ie some companies could buy quota for 2005 - however as quota stops in 2005 future buying is no longer an option

[El_D]

Hi dsukhumvit,

Hopefully you have a target market/country in mind.

Visit their embassy/consulate or better yet customs office if they maintain one in BKK.

Find out the import duty and quota information for your product.

If it still looks feasible at that point then visit the Thai Dept. of Export Promotion and have a sit-down with the nice folks there to make sure that they have no restrictions on the item you intend to export. Most likely they won't.

Next--how will you deliver and to whom will be supplying?

Will you be sending 20 and 40 foot containers full of stuff to Wal-Mart or will you market smaller orders to individuals and/or smaller companies?

If you're sending container loads then go talk to a freight forwarder and get yourself a customs agent in the country you will export to.

If you're sending packages up to 30 kg in weight then go talk to UPS.

[Up2U]

El D,

Are people like Gray McKenzie in Thailand - agencies that have offices in most countries for import / export ?

They would surely be able to handle both Thai and port-of-entry paperwork for dsukhumvit, leaving him with the job of putting goods and customers together.

But it is a field full of pit-falls, as I have found out many times when trying to clear materials being sent in to me for incorporation in whatever piece of concrete I am pouring at the time.

Talk to the experts, every time.

[dsukhumvit]

El_D, et al;

Thanks for the info. Very informative.

My little enterprise is not nearly so ambitious as containers at the present time. One can hope of suppose. As far as restrictions go, these items are clear in that area, but a trip by the export office would probably still be in order.

Thanks again.

dsukhumvit

[Axel]

Just to give you a true life example of FOB cost for a shipment we just carried out:

Shipment to the USA by boat (LCL)

33 cartons

Total gross weight: 518.68kgs

Total volume: 1.910cbm ....

Total FOB cost charged by the contracted forwarder: THB 6,670.65 including 7% VAT. ........

Dear Richard,

you should write a book for exporting and shipping. Could be quite a success.

Allow me a small correction,

Airfreight Here it really goes by weight....

Consider the weight - volume - ratio, usually 1:6 means if you airfreight 7 cbm with 1000 kgs you actually have a payable volume weight of 1.167 kgs (7 div. by 6)

As for the price up to fob I asked my staff who commented as below, means the price you paid is within the market range:

We can offer our FOB cost as follows :

- Customs handling and transportation picking up

cargo within Bkk area (Thb 2500 x 1.91 cbm) : Thb 4775

- THC (Thb 100 x1.91 cbm) : Thb 191

- CFC (Thb 75 x 1.91 cbm) : Thb 143.25

- Bill of lading fee : Thb 500

V.A.T 7% : Thb 392.64

Total : Thb 6001.89

[Richard Hall]

Dear Axel,

Thanks for the correction. Actually, a comment from you does not come by surprise because I understood you have been or still are in the forwarding business while my background is more sales and marketing.

Your knowledge about shipping is surely much more extensive than mine. Hey, maybe we should write that book together you cover that logistic part while I take care of the export subject.

Maybe a small favor that you could do me. If you get a chance please tell immigration, labor department and the tax people that I really know my job and actually always try hard to land business for Thailand. Like every year in February it is entry permit and work permit extension time or better call it ulcer and grey hair season. Possibly, they listen to you and keep the flames of the grill at a little lower level enabling the victim to fully concentrate on business (just dreaming)

Anyway, think your FOB cost are competitive. Have been working with a local forwarding company for quite a while and they always provided a good service but am surely going to get in touch with you if the need arises.

[Axel]

Dear Richard,

ah, the walk to Soi immigration

Knock on wood, I still have no problems with my yearly trip to Canossa.

Seems they are ost happy with the VAT-returns.

BTW, I did not try to do a sales on you, just when I saw the figures I asked for a quotation from my export people. Neither want to correct, your explanation was excellent...

[BlackJack]

can someone fill me in on airfreight

i use couriers to send packages to UK USA EU etc

takes 3 days but costs a lot

with the 1500 bht airfreight you mention - how long does it take approximately

to ship to say UK

Example

0 - 5kg: THB 1,500 per kg

6 - 44kg: THB 250 per kg

45 - 99kg: THB 115 per kg

100 - 499kg: THB 110 per kg

500 - 999kg: THB 101 per kg

thanks

[Richard Hall]

Dear Richard,

ah, the walk to Soi immigration 

Knock on wood, I still have no problems with my yearly trip to Canossa.

Seems they are ost happy with the VAT-returns.

BTW, I did not try to do a sales on you, just when I saw the figures I asked for a quotation from my export people. Neither want to correct, your explanation was excellent...

Dear Axel,

Thanks, fully understood and anyway even if their was no intention to sell your feedback has been well noted and appreciated.

Immigration: Lucky you. Pay my monthly VAT tolls as well but even after 4 years a company founded from scratch is still on the rise but it appears like the officiers sometimes believe success and huge chunks of taxes come in overnight. Anyway, will place a big piece of wood right beside my desk enabling me to make the knocking a daily routine at least until the passport shows the right date in the extension stamp. Maybe I should get myself professional assistance and look for a woodpecker at Jatujuck market. In today's rough times when knocking on wood has become a regular exercise for all foreigners I could rent that animal out for let's say 100 Baht an hour (plus 7% VAT) and practically catch two birds with one stone, I mean pecker (whoops starting to lose the tread...)

[Richard Hall]

can someone fill me in on airfreight

i use couriers to send packages to UK USA EU etc

takes 3 days but costs a lot

with the 1500 bht airfreight you mention - how long does it take approximately

to ship to say UK

Example

0 - 5kg: THB 1,500 per kg

6 - 44kg: THB 250 per kg

45 - 99kg: THB 115 per kg

100 - 499kg: THB 110 per kg

500 - 999kg: THB 101 per kg

thanks

Dear Black Jack,

time in terms of air freight is surely not the issue because forwarding of goods that do not need to be moved to a very odd destination should be accomplished within a week. But on the other hand don't get trapped by the relatively low appearing freight rates per kg because additional cost such as FOB charges (here in Thailand) and also clearance and national transport fees at the place of destination will arise.

Courier (abt. 3ays) and air mail (abt. 1 week) is a door to door or post office to door service (ALL already included).

Don't know what courier services you employed (if you have an account with them charges drop quite a bit from the regular rates).

Personally, I usually go with EMS (for example rate for 5kgs to the UK = THB 2,850) or airmail (5kgs to the UK = THB 2,420) for smaller quantities such as up to 20kgs. Very convenient because you just go with your merchandise to the main post office in Bangkok at Charoen Krung Road, use the packing service there for a few THB write the address, fill in a form (in case of EMS) and let it go.

Airfreight, however, requires you to do the proper packaging, issue a packing list (no of boxes, measurements, net weight, gross weight) and issue a commercial invoice. All has to pass also Customs and well the exporter (you) needs to have a hard card entitling him to export.

As a rule of thumb you should only consider airfreight for shipments of at least 20kgs. Best shipment method should be decided on from case to case depending on the weight and final destination.

In certain cases it may even happen that EMS courier is cheaper than regular airmail.

At the main post office you can get complete lists for EMS, air mail, economic air mail and surface transportation showing the rates by weight and destination at a glimpse. Ask for this at the information counter when you get into the post office.

Transportation times:

EMS: approx. 3 days

Air mail: (approx. 7 days)

Economic air mail (SAL): approx. 15 days

Surface: approx. 2 - 3 months

With this on hand your decision making becomes very easy.

In respect of airfreight there is no way around talking to a forwarding company (Axel can be your man here). Give them the appropriate parameters such as kind of merchandise, gross volume and gross weight, final destination and place where to pick up the goods here in Thailand and ask them for an all-in-all quotation (including custom clearance and door delivery at the final destination). THIS amount you devide by the total weight of your shipment and you have the figure per kg to compare with the EMS or any other courier service company's or air mail rate per kg.