Many purchasing managers,when negotiating prices,naively assume that the allocation of costs is already set in stone as soon as they see terms like "DDP clause" or "EXW clause" in the contract.However,reality often proves to be harsh: when the goods are held up at the port and the agent presents a lengthy bill,disputes over "agency fees," "tax prepayment," and "operating fees" inevitably arise.In reality,90% of import disputes do not stem from tariffs,but from misperceptions about the "agency service fees" in the grey areaThe trade terms only stipulate the point of risk transfer,but they don’t specify who should buy the coffee for the customs broker.

Trade terms are just a framework.The allocation of costs depends on the contract

In B2B practice,we must separate "statutory fees" (tariffs,value-added tax) from "commercial service fees" (customs brokerage fees,document exchange fees,storage fees).Many business owners confuse the two,leading to huge loopholes in cost accounting.The following is a cost attribution comparison table based on the Incoterms 2020 rules and domestic practices.Please be sure to check which category your contract belongs to:

Cost Confirmation SOP: Three Steps to Identify the Responsible Party

Just looking at the form isn’t enough.You need a set of executable SOPs to assign responsibilities and avoid being at a disadvantage after the goods arrive at the port.Whether you’re a buyer or a seller,the following process can help you avoid 80% of cost disputes.

Step 1: Clarify the definition of "full package" in the PO/PI

Output:

Don’t just write "Clearance charges included".You must clearly list the specific items included in the contract annex:

• CustomsDeclarationFee(CustomsDeclarationFee)
• DocumentHandlingFee(DocumentProcessing/D/OFee)
• TerminalHandlingCharge(THC)(TerminalHandlingCharge)
• Demurrage/Detention(Demurrage/Detention—usuallybornebyresponsibleparty,butstartdateneedsdefinition)

Step 2: Distinguish between "advance payment" and "actual reimbursement for actual expenses".

Output:

This is the most likely to go wrong part.If it is agreed that the buyer will bear the cost,but the seller appoints an agent to handle it,it must be stipulated in the contract:All agency fees must provide third-party invoices,and added commission shall not exceed X%It is strictly prohibited to accept a "fixed price" lump-sum payment,unless you fully trust the agent.

Step 3: Sign the "Agency Fee Confirmation Letter"

Output:

Three days before the goods arrive at the port,the agent is required to provide a detailed estimate of the fees.If you discover at this time that the "document exchange fee" is as high as thousands of RMB (the market price is usually a few hundred RMB),you have enough time to change agents or negotiate with the supplier.Never wait until the goods arrive before asking about the price.

Overlooked D/O and Operation Fee Black Holes | Cost Control

As a consultant who has been struggling in this industry for 15 years,I want to tell you a well-known secret:Many designated freight forwarders (especially those designated by overseas suppliers) don’t make money from freight charges,but from the exorbitant "miscellaneous fees" charged at the port of destination..

In theDuring the customs clearance process,the people who are most likely to be overcharged are“D/O Fee” (Delivery Order Exchange Fee)Under the FOB terms,if the seller appoints a freight forwarder,the forwarder’s branch office at the destination port often charges the buyer a document exchange fee of up to $200-$500,while the market price is only around RMB 300-600.This fee is often in a legal gray area,as the bill of lading belongs to the freight forwarder,and you can’t get the pickup note without paying the fee.The only way to solve this problem is to insist on using a different freight forwarder during the negotiation stage.“C&F” TermsWe will strive to have the buyer appoint a customs clearance agent in the destination port,so as to regain control over the cost of customs clearance.

3 Things You Can Do This Afternoon

No matter how much theory you have,it’s better to take action.To prevent the next import from causing cost overruns,please immediately carry out the following actions:

• Theauditofthecurrentlyexecutedimportcontractisongoing.:FindallFOBorEXWclausesandconfirmwhethertheyclearlyspecifythepartyresponsibleforandthemaximumamountofthe"customsclearanceagencyfeesattheportofdestination".
• Establisha"whitelist"mechanism:Contactyourlogisticsdepartmentandlistallthefreightforwarderswhohavecharged"highchange-orderfees"or"abnormaloperationfees"inthepastyear.Addthemtothesupplierblacklistorrequesttoreplacethem.
• Requestatemplateforthebreakdownoffees:Ifyouhaveanimportagentwithwhomyou’vebeencollaboratinglong-term,askthemforastandardtemplateofthe"ImportCostBreakdownTable".Nexttimeyousendapurchaseordertothesupplier,simplyattachitasanattachmentandtellthem,"Settlethepaymentaccordingtothisstandard.Iwon’tpayasinglepennymorethanthat."