September 24, 2020
The COVID-19 pandemic has accelerated technological advancement in the automotive industry due to adapting to the changing environment. New methods of auto-mobility are being explored to include smaller vehicles with reduced CO2 emissions.
Electric vehicles (EVs) manufacturing is expected to increase exponentially due to sustainability awareness and increased focus by automakers on diverse mobility solutions. Autonomous driving, connectivity, electrification, and shared mobility are all on the automotive industry's agenda.
The political environment has resulted in international trade barriers between China and the U.S. and elsewhere in the global marketplace. The future of Brexit negotiations and relations with the United Kingdom are undecided, and the increase in protection of national borders is evident; however, globalization is still unfolding. The supply eco-system in the automotive industry is still interdependent on global trade.
China remains a crucial source of supply for auto-parts into the United States for the automotive aftermarket as well as for original equipment manufacturers (OEM) and let's not forget, the USA is also considered the world's largest finished vehicle market. There is an abundance of auto parts stores and manufacturers in China supplying the U.S. market with critical components and parts.
If your organization is shipping auto-parts from China to the U.S. and are part of the automotive market evolution, you may wish to consider the following checklist to consider when sending your auto parts from China to the U.S.
Multiple transportation modes are available to ship auto parts from China to the United States, including Ocean Freight, Air Freight, or even a combination of Rail Freight / Road Freight into Europe and then onward freight forwarding from a key distribution hub in Europe such as Amsterdam or Frankfurt. Your auto parts' transportation method depends on multiple factors, mainly if you are shipping to the East Coast or West Coast of the United States.
With so many options for your freight transportation requirements, another critical factor to consider is transit times. Dependent on your auto parts shipments' urgency, there are multiple options to ensure your cargo arrives when you need it. The balance between cost and transit time from China to the U.S. would be a key consideration when deciding upon your shipping service. Freight rates can range from premium to deferred and transit times from 5 days to 42 days. Also, to be considered is the current COVID-19 environment that has placed pressure on international transportation.
It is a legal requirement for all carriers to supply cargo insurance. However, carrier liability provides limited cargo insurance coverage. Therefore, should there be an unforeseen event, for example, a natural disaster or even an in-transit accident, this level of insurance may not cover the full value of your auto parts. You may wish to consider full cargo insurance for increased protection against loss, shipment damage, or theft of goods.
The typical export exchange requires documentation when shipping internationally. Items to consider are the following: commercial invoice (that would include your Incoterms® – see below) as well as cargo insurance information, a packing list which would enable US customs to locate any item of the cargo for inspection, certificate of origin as well as your shipping letter of instruction, often referred to as an SLI, that gives guidance to your freight forwarder with full details of your shipment needs.
Incoterms® is an abbreviation for 'International Commercial Terms'; they are used in international shipping to reduce confusion between the buyer's and seller's ownership.
Ex-works (EXW) and Free On Board (FOB) are the most frequently used Incoterms; however, there are multiple options. Further information here.
The international trade environment between the United States and China is subject to changing trends. Most recently, Section 301 tariffs have impacted international trade between China and the United States. Additionally, some services can be offered by a customs broker. Therefore it is essential to discuss, before engagement, the application of bonds or potential use of a Foreign Trade Zone (FTZ) within a warehouse.
An essential factor in understanding is how your auto parts are classified under the Harmonized Tariff Code (HTS codes) classification; there may be a possibility that some goods are excluded from Section 301 tariffs, for example, imposed on imports from China.
How much is air freight from China to the U.S.? Well, that depends. International shipping and freight forwarding can be subject to capacity fluctuations (particularly evident during the COVID-19 pandemic), which could impact your transportation costs significantly.
The Peak Period traditionally begins in August due to the increase in consumer demand in the festive season. Peak season 2020 appears to be following this trend with increased uncertainty due to the COVID-19 pandemic and additional transportation disruption.
Traditionally it ends in October/November, so it would be worthwhile considering your supply flows, storage requirements, and any fluctuations in demand that you foresee for your auto parts in the United States. If shipments can occur outside of peak season, valuable cost savings could be of benefit.
Our automotive logistics experts at Crane Worldwide are here to help! Crane Worldwide Logistics has international automotive experience creating and managing complex supply chain solutions for the automotive industry from auto parts to finished vehicles to ensure our clients' operations are leaner, faster, and more cost-effective. Learn More
CASE STUDY: Working in partnership with an electric vehicle manufacturer, we were able to identify the key challenges facing the organization's imports from China to the U.S.
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