Factors that influence international shipping costs

Ryan

3.5k 3 December 2020 at 11:12 7 minutes to read

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When you run an e-commerce business, international shipping rates can be some of the most varying and unpredictable costs you have to deal with. They're affected by everything from fuel prices, trade tariffs, and your transportation method to the weather and geopolitical events. We'll detail all those factors, and several others, as we go along.

There’s no doubt that running an e-commerce business can get expensive, but most of the costs are predictable and consistent. When it comes to international shipping, however, they tend to be neither. You can’t just call one place or do one quick calculation. Rather, you’ll have to consider a very wide set of factors. Some of them are codependent, while others will be totally out of your control. Either way, you’ll need to be prepared.

WHAT INFLUENCES INTERNATIONAL SHIPPING COSTS?

International shipping rates involve more than paying a shipping company to take your product from one place to another. If you want to enjoy long-term success, you’ll need to know the fees that come with your transportation method and the tariffs charged by the countries you sell to, along with how factors like weather, the state of the world economy, and natural disasters can add to your final bill.

DIMENSIONS AND PRICES OF YOUR PRODUCTS

Before you start calling shipping companies, you should record—in detail—the dimensions of your products.
Of course, you won’t spend as much money if your goods are light, small, evenly shaped, and/or especially durable. Fragile products, however, require stronger and more spaced-out packaging, and odd shapes only complicate that further.
Heavier and larger products, in turn, make it so the vehicle transporting your goods can’t hold as many items at once, potentially raising fuel costs and other fees in turn.

TRANSPORTATION METHOD

Once you’ve measured the size and weight of your products, it’s time to consider a shipping method. Some won’t have a choice with how they ship to certain places, but there are three options for the most part: land, ocean, and air transportation.

COMMERCIAL DRIVER LABOUR MARKET

Starting with land transportation, you’ll need to consider the current state of the commercial driver labour market. Not just anyone can drive a truck and those that do spend weeks (and sometimes months) of time and effort to get their licences.
The greater issue is the fact that older drivers are increasingly starting to retire, and not many younger people are stepping up to fill the positions. Along with that, drivers have made a point to demand higher wages; they’re well-deserved, but keep the resulting price increase in mind.

OCEAN FREIGHT

We may not use ships for transport as much as we used to, but most international commerce is still done on wide-open oceans.
As far as time goes, it can take a week or two on average for your products to reach their destination. That can seem like a while in today’s market, but it’s worth considering international shipping boats are the size of small towns. They take their time, but they’re able to ship everything at once, saving you tons of money and time if you plan properly.
It’s not that cut and dry, though, as we’ll detail in upcoming sections. Inclement weather can create major delays, and there is a litany of other minor and not-so-minor fees that can pop up in the process.

AIR FREIGHT SHIPPING

Now, given that we’re in the modern age, we’re sure you’re thinking how much more convenient it would be to ship your products on a plane.
For the most part, you’re right! It takes hours as opposed to days, can be much more direct, and is generally more reliable thanks to the smaller scale of air freight operations. That last point, however, is also one of the main flaws of air shipping: Even the most massive freight planes are puny next to an average ocean freighter.
Not only does that mean you can’t ship as many products at once; it also means you’ll have to refuel on a more regular basis. In turn, you won’t have this option available to you at all if the cargo is especially heavy.
Overall, air freight rates can be around 500% that of ocean freight rates. We’re not saying it isn’t worth it for certain businesses, because it absolutely is, but you should consider it carefully before making it one of your main shipping methods.

FUEL COSTS

No matter what transportation method you choose, of course, you’ll have to keep fuel costs in mind. As those amongst you who drive cars will know, prices can change overnight. You never know when an exporter may decide to drop their prices, or when high demand may lead to scarcity.
You’ll never be able to calculate exact costs in advance, but you can always prepare a budget in advance. There’s no need to prepare for the apocalypse, but you should be prepared to at least cover the highest fuel prices you’ve ever had to deal with in the past.

WEATHER

One of the only factors less predictable than fuel costs, you best believe the weather will play a role in your shipping rates.
The best circumstances you can hope for, obviously, are mild temperatures and clear, sunny skies with no wind or excessive humidity. As rain or snow comes down and the wind blows harder, however, trucks, ships, and planes will all face delays. If these vehicles have to spend more time on standby or out on their deliveries, you can expect to bear the cost of those setbacks.

BUSY SEASONS

Speaking of which, you’ll have to consider during which seasons you’ll be shipping products. Outside of the weather, you’ll have to make note of the fact that some months see more product shipments than others.
The period from late November through December includes the increasingly popular Black Friday, Cyber Monday, and, of course, Hanukkah and Christmas. Since there are lots of e-commerce purchases being made, and the weather is stormy in the Northern Hemisphere, you can expect to pay higher shipping rates than during any other time of year.
Busy seasons also include the month or two after major product releases, and during other holidays that involve gift-giving or B2C spending.

International shipping rates involve more than paying a shipping company to take your product from one place to another.

UNEXPECTED COSTS

Now, remember when we mentioned leaving room for error? We want to make a point of stressing that again, since you may find there are a dizzying amount of unexpected costs that can pile up during the shipping process. They may not be your fault, but handling them will be your responsibility.
With ocean freighters, for instance, one of the main semi-unexpected costs is GRI, otherwise known as a general rate increase. These are applied by the freighter companies to cover losses taken on during less busy shipping seasons.
We say they’re semi-unexpected because they’re usually applied at least once a year, even when business is stable. When things aren’t going as well, though, companies may apply them two or more times in one year.
You should also be prepared for technical issues, such as mishaps during product unloading and troubles with the vehicles themselves.

GOVERNMENT REGULATIONS

Moving away from the unexpected, you should be aware of government regulations surrounding the shipping process well in advance.
If there’s a legal restriction on how long commercial drivers can work, for example, you could either hire more drivers or account for driver breaks when quoting time estimates to your customers. It’s also important to note that ocean and air freighters face similar regulations you’ll have to keep in mind.

TARIFFS AND CUSTOMS FEES

Tariffs and customs fees will be some of the main costs you’ll deal with in international shipping.
See, when someone—whether they be an individual or company—orders a product in a country where there’s a tariff on said product, they’ll have to pay an extra tax. That, in turn, drives up how much it costs to have those goods shipped, making them less desirable for consumers in your international market.
Aside from that, if there’s even the slightest mishap with the bureaucratic end of your shipping process, or if you arouse suspicion in some other way, you’ll be subject to searches by customs authorities. You don’t ask for them, but you’ll end up taking on the bill, and it can get dizzying if you’re doing a bulk shipment.

WORLD ECONOMY

We’ve been discussing some specific factors up to this point, but accounting for every detail will do little to help if the world economy is in bad shape. If people can’t afford to order as many products, you’ll have to pay more GRIs and spend more time and money on shipping while transferring less cargo.
Even when things are going well, you’ll still have extra costs to consider. Considering the flip side of our example, consumers being able to order more products means every season becomes a busy season. Along with leading to increased shipping rates, it could lead to potential increased fuel costs since you’ll have to spend time stalled in high-traffic ports.

INTERNATIONAL ISSUES AND GEOPOLITICAL EVENTS

Lastly, we know now, more than ever before, how much a globe-spanning disaster can interrupt our economy. The effect COVID-19 has had is incalculable, and it’s fair to say that it has interrupted the international shipping process as well.
E-commerce business is booming, yes, but shipping is far slower as a result of social distancing and other safety requirements. When those two situations collide, you end up seeing either delayed shipping times or overly crowded ports that lead to higher fuel costs.

DON’T LET THE COSTS OF INTERNATIONAL SHIPPING DISCOURAGE YOU

It can seem near-impossible to figure out shipping costs at first, but we hope this breakdown has cleared things up enough for you to feel confident in starting.
It may take months or years of preparation for you to be ready to ship internationally, but the effort is all worth it if you apply your time, effort, and budget correctly.

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