If you are planning on expanding your shipping markets overseas, then you will eventually need to enter into a contract with an overseas carrier. The burden of knowing just what the specifics of a contract are when you enter into one puts a lot of pressure on you as the shipper. Many of these contracts can last over a year or more. If you enter into a bad contract, you could be stuck dealing with some of the following issues:
- Rates that are too high for you to get a return on your shipment investment
- Market conditions that do not support selling your products in the markets that your shipping contract has given you access to
- Being unable to adjust the contract to address any of the above two points
The burden is on the shipper to know what to do if any of the things above happen. Here are some things you should be looking for when shipping overseas.
The Length of the Contract
One of the first things that you should look at is the terms of the contract. Generally contracts come in two forms; long term and short term. There are advantages and disadvantages to both.
Short-Term Contracts: Obviously these are contracts that do not last very long. Because of their brevity, they can easily be gotten out of or adjusted based. Having a short term contract gives you room to negotiate more often.
This is a two way street, however. It also gives the carrier room to change rates on the contract due to market conditions. This means your shipping costs could be more volatile.
Long-Term Contracts: A longer term will allow you to fix your rates for a greater period of time. This means that your rate is a known quantity and isn’t going to be changing frequently.
However, a long term contract can go sour if the rates become too high due to market forces. Be sure that you know what you are entering into when you pick up a long-term contract with a carrier.
Index Linked Contracts
A contract like this will be adjusted automatically due to some external measure. You could link the contract to the costs of the goods being shipped, for example. These are very flexible contracts and offer you security in your carrier while giving some more flexibility than a long-term contract might offer.
Contract Value and Your Needs
Not only is the length of the contract important, so is the value of the contract. You need to know what you are paying up front and what your market will support. Make sure that your contract fits your economic and business plans.
Once you have your shipping contract in place, you will need someone to do your industrial packing and transloading. That is where Cratex Group comes in. We are experts in the field. Contact us today!