Key Logistics of Oversees Product Sourcing with Refael Elbaz

Andy Splichal:

Welcome to the Make Each Click Count podcast. This is your host, Andy Spleckel, and we are happy to welcome this week's guest to discuss today's topic, which is key logistics of overseas product sourcing. Today's guest is the founder of Unicargo, a freight forwarding and warehouse company with extensive experience and expertise in the e commerce space, especially on Amazon, FBA world, digital freight and warehouse placement. Unicargo specializes with marketplaces such as Amazon, Shopify, Target, and Walmart. A big welcome to Rafael Elbaz. Hi Raphael.

Refael Elbaz:

Hey, Andy. How are you today?

Andy Splichal:

I'm great. Thanks for joining. Yeah, we recently launched a course on selling Amazon and sourcing products. But if you source products internationally, then of course you need to figure out how to get those products to the US, which is why I'm really excited to talk to you today. So what are some of the obstacles to importing large quantities of products from outside the US?

Refael Elbaz:

All right, that's a great question. So as far as I understand, as we know, most e commerce businesses and sellers actually import their products, right? They are not being done domestically. Most of them are actually importing the products. So it means that they need a logistics partner, a company that would help them import the products, make sure they are compliant, run them through customs clearance. And the obstacle and challenges, basically a, I would say, is finding the right partner to be on your side, to educate you on things and make sure you are doing the right thing, take you hand in hand. B is making sure you are compliant in compliance. Right. There are what we call a marketplace compliance, which means what you need in order to sell on Amazon or target or Walmart or any other marketplace you work on.

Refael Elbaz:

And that's one type of compliance. The second type of compliance is actually import compliance. What do you need in order to actually import a product into the country? Sometimes these two different types of compliances are different, right. You would need a certain certification or approval to sell on a marketplace, but different certificates or labels or graphics to actually import the product into the country.

Andy Splichal:

Yeah, I mean, let's talk about that. What is required to bring product into the country? Get it through customs.

Speaker A:

Right.

Refael Elbaz:

So the main question would be, what type of product are you importing?

Speaker A:

Right.

Refael Elbaz:

There are different product categories. Like cosmetics would be considered as FDA regulated toys, consumer safety product commission. Not only toys, but every product that intended to the use of kids under six years old, under twelve years old. Sorry. So every different product category will have different requirements. I'm here to say that most products, right, general products, doesn't require a spatial certification or licensing or anything like that. But in any case, before producing, even before paying a supplier of your products, before you go into production, you got to make sure you consult with your logistics partner or your logistics provider and share with them the idea, share with them about your product, the design, the idea, the actual product. And make sure you're not missing anything under the compliance.

Refael Elbaz:

Right. Because once you source a product, right, you find the factory before you actually place your order. You want to make sure that factory has the certification needed. Right. You don't want to be caught in an instance where you actually paid for your product, right? You paid 30% of the production, 50% of the production, and all of a sudden you figure out that, oh, sorry, the defective doesn't have the certification required to input into the states or into the European Union. And that happens a lot, by the way.

Andy Splichal:

Really? Now, what amount of fees, taxes is it? Again, depend on what type of product. I don't even know how do the duties and taxes work on importing products?

Refael Elbaz:

So on every product, almost every product imported, you have to pay import duties, right? If we're talking about the US, we are talking about import duties. If people want to import to Europe, these are import duties plus VAT. In Canada, these are import duties plus GST. The actual duty percentage is based on the actual product and where is it coming from, right. The country of origin. There is what we call an HS code, HTS code, harmonized system code. Every product gets classified with different code and different tariff. And based on that code, you would understand the percentage of Duty that product would pay.

Refael Elbaz:

And that percentage is based off the actual value of the goods, right? So you are buying products worth of, I don't know, $50,000 worth of products. Your HS code associated with your product will say, hey, this pays 5% duties. So basically you would pay 5% off that $50,000 worth of goods and you.

Andy Splichal:

Know, you said that it depends on the country, but what is, I mean, it's hard to give a ballpark, but I mean, we talk in duties are like 5%, typically 50%.

Refael Elbaz:

Let's exclude China.

Andy Splichal:

Okay.

Refael Elbaz:

Even though it's the biggest manufacturer today, if we exclude China, I would say consumer products that we typically see on ecommerce businesses, you would look at between zero to 10%. That would be the major range. If products are made in China, there would be an additional Trump duty or section 320. And that goes up to, I would say the average would be 15%, 16% out of your value, your imported value now.

Andy Splichal:

And that's China. It matters then where you're importing from, as far as what country, with taxes. But is there other complexities with importing products from China?

Refael Elbaz:

Well, besides from duties, the complexities of importing a product doesn't really relate to the country of origin, relates to the actual nature of the product. Right. What is it made of? What its intention? Is it a medical device? Is it a cosmetics? Is that thing that touches food? Or a product that has medical claims? But I would say that it's not the origin of the product. It's the nature of the product that makes the compliance or the complexity of importing a product.

Andy Splichal:

Now, what are some of the common mistakes that you've seen companies make when trying to import their products?

Refael Elbaz:

So the first one we've already discussed, the first one is basically not making sure you are in compliance before actually producing your product, before actually starting production. So I would say compliance and import regulation would be the first. The biggest mistakes we see, the biggest by far, that would be the biggest. Second is lack of education. All right? And that's very typical for ecommerce businesses, especially people just starting out. Obviously, it's very different from a traditional importing company where they have a supply chain manager with years and years of experience, and he knows the ropes, and he's done it for many years. So when we see ecommerce businesses, and that's a type of customers we work a lot with, they go to a course or they sign up for an academy, they learn on how to sell on Amazon or how to sell on Walmart, and they become these good marketers, but they still lack of real life experience with regards to supply chain. Right? Importing, production, quality control, all of that.

Refael Elbaz:

So the second thing would be lack of experience or uneducating yourself or not learning enough on even simpler stuff like inco terms.

Speaker A:

Right.

Refael Elbaz:

When you talk to suppliers on your trade terms, how do you buy your products and all of that. So I would say that the second biggest challenge, it's not a mistake, it's a challenge. It's mostly lack of education or lack of experience, call it this way. The third would be not choosing the right partner. Or it's very easy to have your supplier produce your products and actually ship it for you or act as your freight forwarder. But that is a very dangerous place to be in, because when you have your supplier, the factory, do your logistics, you are mixing up very different things together, right? The supplier, his job is to manufacture, to produce goods. That's what he's good at. And when you ask him to do your shipping or ask him to ship it to your door, to your warehouse, or to Amazon, you're basically having your supplier contact his freight forwarder, let's say in China, and now he becomes the client and not you.

Refael Elbaz:

And your interest might be different. Right? Now you have a problem. You need to go to your supplier and he, in his term, need to go to his freight forwarder. And you don't have direct communication with your logistic partner. So the third biggest mistake would be not working or not choosing your own partner, your own freight partner, your own logistics provider. When you can take the phone and call up and make sure you get your questions answered, or when there is a problem or delay, you can talk to someone.

Andy Splichal:

Now, what would be an example of where there would be different interest as far as the person who is producing it for you versus your interest?

Refael Elbaz:

All right, so let's say I'll give you a good example. If your supplier is trying to make a buck on you, right? He's trying to buy at $50 and sell at $100 or buy your shipping at $1,000 and sell it in $1,200 to you, right? He's trying to make a profit because he'll now need to work on it. So he might choose the slowest possible option to pay the cheapest possible freight, but your interest is to get it as fast as possible to your market, right? As fast as possible to Amazon. And now you've basically paid the cheapest possible price, right, because that's what your supplier chose. And in logistics, there is a rule of thumb that says the cheapest means slowest and more expensive mean fastest, right? An air freight can take one day, but it's the most expensive way to ship. Ocean freight is much cheaper, but it takes 30 days, 40 days, based on your final destination. So speed versus price would be one conflict of interest, right? Secondly is there is what we call the consolidation or shady stuff being done under a consolidation, right. Chinese freight forwarders or foreign freight forwarders, non registered, non FMC licensed, they would have different tricks, very old tricks that freight forwarders can do that can put your product in jeopardy, can risk your supply chain, for example, you might not be the importer of record, you might not be the name of the bill of leading, you might not be the owner of the product until it gets delivered to your door.

Refael Elbaz:

And that might be another conflict of interest. I would say the biggest conflict of interest would be your desire, right? Your needs, as far as speed, as far as budget versus your factory needs or your supplier needs, as far as you can bet that his desire or needs is to make a buck, make money because he works, right. You'll have questions for him. You'll call him, you'll ring him, you'll ask where is your shipment? You'll ask questions. And he would need to put the time and effort to make sure he answers it or make sure he asks the logistics provider and forward you the questions. So his interest would be to make a buck.

Andy Splichal:

Yeah, no, that makes sense. Now, I see you guys also offer a service for your clients where you can actually ship directly from overseas to an Amazon FBA warehouse or Walmart or target. Tell me a bit more about how that works.

Refael Elbaz:

So basically, if Amazon allows you to, if you have enough inventory space on your account, the cheapest possible option or the most cost effective option would be shipping from your factory directly to Amazon, right. You would be able to skip a three pl, right. Skip a warehouse. And there is additional cost in working with a warehouse in a destination in the US, for example. So what would happen is we would either give you the actual instructions or advisor on how to prepare your shipment for Amazon, right, to put the box labels, to put the skus on the products and how to pack your products and how to make sure you're in compliance with the marketplace. Compliance. And that would be the best way to save money or the most cost effective way to have your supplier do it, right? Your supplier, you would put the labels, the box labels. He will pack it accordingly.

Refael Elbaz:

And we can actually check that he's done it, right. Because we have our team in China, we have our own offices in China. And before we go and pick it up, we actually check with a supplier that has actually filled your instructions or our instructions and prepared that shipping for Amazon. This way we can have it shipped directly from China to the port. And from the port it goes directly to Amazon. You can save thousands of dollars, basically in the middle.

Andy Splichal:

How did Covid affect shipping on your end? I know in Southern California, it was way behind as far as there were just boat after boat. It wasn't getting unloaded. How did you get through Covid with shipping?

Refael Elbaz:

Well, Covid was a very interesting time for freight forwarding businesses. Was a very profitable time, I got to be honest, because container used to cost $1,500 from Shanghai to Los Angeles, $1,200. And all of a sudden, it became $15,000. Right. So as far as prices, prices went through the roof. The prices was the highest since containerized shipping, since they invented containers. That was the most expensive prices for containers ever. And as you mentioned, backlogs.

Refael Elbaz:

There was huge backlogs. The way it affected our business is that shipping was booming. Everybody was shipping, everybody was ordering. Ecommerce was booming like crazy. So there was so many cargo out there, and there was so many clients needs to ship their products, but there was less and less capacity in the market, meaning space on vessels or empty containers. Because think about it, all of these vessels lining up in the southern California shores, standing there, there was time where there are like 40, 50 vessels lining up, waiting about a month just to anchor. And all of this container was supposed to bring back empty containers to the origin countries, like China, India, Vietnam. And when these empty containers couldn't get back, you couldn't find an empty container in China.

Refael Elbaz:

So even though you have so many clients needs to ship, right, they want you to ship their products. There was a very big problem actually finding an empty container to fill the products in. And once you find an empty container, there's now a problem to find a space on a vessel to put your container in. So there was a huge demand and very slim supply. And it's a very interesting thing for a business. Imagine that you have so many clients lining up, waiting in line to buy your products, but you have no products to sell. But they still knock on your door and they screaming, I want to buy, I want to buy. But you have no products to sell.

Refael Elbaz:

So that's a very interesting time for business. That's what drove prices up, by the way. There was so much demand and less supply.

Andy Splichal:

Now, have those prices come back to where they were before?

Refael Elbaz:

Yeah, prices came back. They were actually even a bit lower than pre Covid. But now they are going up a little bit. Not too dramatic. But we see container prices from Shanghai to Los Angeles these days. We are talking about $1,600, $1,700 for a full container load port, right? Without picking it up or delivering it to final destination.

Andy Splichal:

Now, if you had a crystal ball, how do you see the shipping industry changing over the next year to 18 months?

Refael Elbaz:

Well, that's a very interesting question. I would say there would be a lot of consolidations in this space, right? Because a lot of companies in the past three years, since COVID started till it ended, we look at it about almost three years. Shipping companies were very profitable. Freight forwarding companies were very profitable. A lot of them recruited a lot of people. A lot of them invested big, big money on tech or development, software development. And all of a sudden prices came back. Nobody believed that prices would decline so fast.

Refael Elbaz:

We thought that these prices will last for a couple of years or at least stabilize in around $5,000 container, $7,000 container. We thought it would never happen again. Where shipping company would lose money, right. When shipping a container at $1,000 rate or $1,200, the actual vessel that the shipping company, they actually lose money. And we thought that times would never come back again, but it came back very fast. So now we see a lot of shipping companies, a lot of freight forwarding companies working on very slim margins while their expenses are through the roof. And a lot of them are either closing shop or either being bought, like consolidated bought by bigger shipping companies. So we think that there would be less shipping companies available out there or not available.

Refael Elbaz:

There would be consolidation, big boys, big companies buying out smaller companies. And that's what we see happens today.

Andy Splichal:

Now, what advice would you give to a listener who would like to source products from outside the US? But they're worried about importing and dealing with customs and everything that goes into mean, where should they even start?

Refael Elbaz:

Yeah. So I would start by reading out or educating yourself on simple stuff like how does it work? Or what's an air shipment or what's an ocean shipment? What's import duties? Or how do you custom clear? There's so many information out there. Just google it or on YouTube. There is so much information knowledge out there. So you can educate yourself. Now remember, you don't have to be an expert, right. You don't need to sit hours and hours in order to learn freight forwarding because you work with a freight forwarder, right? So the best advice is find the right partner for you. Find the company.

Refael Elbaz:

Let's say you sell on Amazon. Find a freight forwarding company that specialize on Amazon Marketplace or have a lot of experience working with Amazon sellers or e commerce businesses.

Speaker A:

Why?

Refael Elbaz:

Because they've worked with guys like you. They probably know that you have no experience or very little experience and they would be very patient to help you out or go on a Zoom call with you and explain how things works. Right. So you don't have to be an expert. You don't really need to understand everything. You just have to find the right problems. Just like in graphic design, right? You need a graphic design done for your price. You don't go and learn graphic design.

Refael Elbaz:

You hire a graphic designer. Now you want to hire someone you have good communication with, you have good vibe and it just works. The best advice is finding the right partner.

Andy Splichal:

Find the partner. Now do you have a favorite success story of a client at Unicargo and how you've helped them grow their business that you could share?

Refael Elbaz:

Well, we have quite a lot of them.

Speaker A:

All right.

Refael Elbaz:

So our company is very special in that regard because we built the company this way, that we work with a huge variety of sellers. We work with people who are just starting out. That's their first shipment ever. And we work with some of the biggest Amazon sellers in the world. We work with the biggest aggregators, FBA aggregators in the world. And in the middle, like small ones, medium ones and huge ones. So we have teams dedicated to their success for every size. We have a special team.

Refael Elbaz:

So we have actually a special team that is dedicated to smaller sales. They would know that they'll have millions of questions and they need to take them hand in hand. And there is no one single success story. There's a lot of them, because we see that our clients, most of our clients that start and take this business seriously, they actually grow. And we see that by the number of shipments, right. They start with the first shipment. And we know, because we have a lead qualification team that you come to us or you send an email and the next thing you get from us is, hey, we'd love to help you. Tell us a little bit more about yourself.

Refael Elbaz:

How many shipments have you had? Is that your first shipment? What are you trying to. So we get to know our clients. So we know that clients started with and saying, hey, that's my first shipment ever. And within a year or two years, they become a client that ships three, four, five times a month. Right. So we see that the clients are growing. Amazon is a great place to be in, even though a lot of people would say that it's saturated and it's not what it used to be back in 2015 and 2016. But we still see a lot of success stories.

Refael Elbaz:

People are making it out there again, people who put the time and effort people who take it seriously. And you know it better than me. If you look at it as a business and you work very hard and you persist and you don't quit, you'll see success.

Andy Splichal:

Now, who is the perfect client for working with you guys?

Refael Elbaz:

I would say that from a beginner up to a big size seller, it would be a perfect size for us. Obviously us as a company, we welcome all size sellers. Whether you're just starting out, whether it's your first shipment or whether you have 100 shipments a month, that would be a perfect client for us. We look at clients the same way. If they are small or if they are big. We have dedicated teams to deal with small clients and we have dedicated teams to deal with enterprise clients. So for us, we value each and every client. Even if it's your first shipment, we want to help you grow.

Refael Elbaz:

Because again, some of our biggest clients became with starts, they started from shipping one product or having their first shipment with us. And we saw it and that's one of our strategies, is basically treating every seller the same way. Doesn't matter your size.

Andy Splichal:

And how does your fee structure work?

Refael Elbaz:

Well, freight forwarding in general, fees are based on a quote, right? You come to us with your shipping dimensions, your volume and your weight, your ship from and your ship to, right. Once we get that information, we build you a quote and that's it. Once you approve the quote, that's the price you're going to pay, right. The shipping world or freight forwarding world works on a low margin level and a lot of transactions, typical freight forwarder would make between 7% to 12%. But that's embedded in your quote. So the quote you are getting from a freight forwarder that's include the freight forwarder, profit inside of it.

Andy Splichal:

And how can an interested listener learn more about working with you?

Refael Elbaz:

Yeah, just Google Unicago. We have a very good presence both on social media. Our website has a lot of great content and you can learn more about us. Can look me up on LinkedIn or Facebook or just Google Unicago. You'll see all the references out there, recommendations, trust pilot, everything is out there.

Andy Splichal:

Well, this has been a fascinating chat. Is there anything else you'd like to add before we wrap it up today?

Refael Elbaz:

No. Keep up the good work. If some of our listeners, they want to take their business building process or journey into the right step, just putting the effort, having a business on Amazon again. We've been in this space since 2015, eight years now. And I can tell you for a fact that building an Amazon business is not something you do on the side. It's not something you can do from a 2 hours work. You got to put the effort like you would put in a brick and mortar like you would put in any business that you would build. You got to put the effort, the time, and if you would do that, you would be able to succeed.

Andy Splichal:

Well, this has been great. Well, thank you for joining us today.

Refael Elbaz:

Thank you very much, Andy. Have a great day for listeners.

Andy Splichal:

Remember, if you like this episode, please go to Apple Podcasts and leave us an honest review. And if you're looking for more information regarding Raphael or Unicargo, you'll find the links in the show notes below. In addition, if you're looking for more information on growing your business, check out our podcast resource center, available at podcast makeeachclickcount.com. We have compiled all of our different past guests by showtopping included each of their contact information in case you would like more information on any of the services discussed during previous episodes. Well, that's it for today. Remember to stay safe, keep healthy and happy marketing, and I'll talk to you in the next episode.