Export shipment denied?

 

Many Viet Nam exporters face the situation of shipment being denied by buyer, common reasons their buyers may raise:

  • Release shipment first, after buyer can sell, buyer will pay later (risky for exporter and agaist what agreed before).
  • Buyers raise some quality problems and request a big discount.
  • Some buyers even do not response at all.

Most of exporters when facing such situation will go the below steps:

1/ Requesting carrier to hold cargo.

2/ Trying to convince buyer to arrange payment and pick up shipment. Unluckily, very rare case that shipper succeed.

3/ After too many unsuccessful efforts, exporter either have to agree for a big discount or trying to find another buyer in that country for a desperate sales.

Above process take minimum about one month for final decision, and one or two weeks for necessary formalities to carry out that final decision. Per our experience, the average time is sixty (60) days.

While the exporter trying to fix the problem, the carrier keep pushing because the storage or container demurrage keep increasing day by day.

Take an example, shipment of 1 twenty-feet (1x20’) container to Los Angeles with carrier Cxx, container demurrage in Los Angeles is as follow:

  • Free time: 5 days
  • From 6th day onwards, demurrage USD220 per day.

It takes exporter 50 days to solve, the container demurrage fee already reach at: USD220 x (50 – 5) = USD9,900.

Most of the cases, under the pressure of increasing cost, exporter must come to agree to sell at big discount (for example, 40 - 50% off the price USD50,000), or desperately sell to other buyer with similar discount level, and exporter surely have to pay the demurrage cost before shipment released by carrier. Exporter suffer double loss here, the cargo price and the costs incurred, loss in this case is USD34,900, not to calculate other costs, for example, brokerage cost.

Worse case, if cargo value is not very high and the costs incurred reach at a big percentage of cargo value, buyer may negotiate they take cargo against payment for container demurrage but no payment for cargo.

In such cases, if exporter determine to ship cargo back to Viet Nam immediately when they realize initial signs of shipment denied, for example, within 10 days after shipment discharged at Los Angeles port, costs will be:

  • Container demurrage: USD220 x (10 – 5) = USD1,100
  • Formalities to re-export out of Los Angeles: about USD500
  • Freight and surcharges: about USD1,000

Total loss about USD2,600 and exporter can bring cargo back to their country, under their control and no more under the cost pressure, they can take time to wait for another good buyer.