Global trading has significantly grown in the past decade as more and more businesses and individuals rely on imports and exports to make money. Experts forecast that international trade will hit more than $32 trillion in 2022 as countless products from different industries are shipped across borders daily.
And along with the positive development in global commerce is also the rise of the international forwarding industry. Numerous enterprises are now partnering with international freight forwarding companies to effortlessly transports their shipments to their destination. In addition, a freight forwarder can help companies tackle various factors that affect the shipping process, including the constant currency exchange rate fluctuation.
What is Currency Exchange?
In its simplest form, the currency exchange rate refers to how much each currency is needed to be exchanged with one another. The US Dollars has always been the standard for currency exchange rates and holds the most daily shares with more than 88%. Currency rates are always considered floating as various factors affect them daily, including economic activity, GDP, and the supply and demand for different products.
The continuous fluctuation of currency rates across the globe can result in shipping surcharges for companies. This makes freight forwarding invoices complicated for organizations to handle. Currency exchange rates affect various factors in how freight costs are calculated, and companies must know how to manage them to avoid massive financial losses in the long run.
Impact on Freight Forwarding Costs
The primary currency used for freight costs is US dollars, and its value against other currencies can affect the overall shipping prices. Various things contribute to the total freight costs, and currency rates significantly affect whether the amount will increase or decrease.
Varying Currency Exchange Rate
The exchange rate in every nation is different, which can significantly impact freight costs. The amount needed to transport goods to one country differs considerably in other nations. Exports to a nation with a weaker currency than the US dollar are a little more expensive. This means that you need to adjust your budget.
Tariffs
For decades, imports have been subject to taxes even before arriving at the destination port. Authorities do this to generate income and protect local producers, as imported items must be sold at a higher price. A specific percentage of the total value of the shipment usually calculates the tax to be paid. Stronger currency rates between the two nations decrease the overall cost of the freight and offset any increase in the tariff rate.
Transaction Fees
Apart from tariffs, many exporters also pay different transaction fees based on how the shipment is delivered. The amount may fluctuate based on the currency value of where the importer or exporter is paying. Financial institutions implement foreign currency conversion and transaction fees, which a shift in the exchange rate can significantly impact.
Conclusion
As global trade continues to expand, it is vital that businesses that rely on shipping understand the various factors that affect forwarding costs. One of which is the exchange rate, which significantly affects the overall shipping expenditures. Currency exchange rates adjust daily, and it can be tedious for importers and exporters to handle them. But partnering with a reputable logistics company can help them efficiently plan the needed amount for every freight.
Excelsior Philippines, the country’s top freight forwarding and customs brokerage company, has been in the industry for more than two decades, providing our clients with peace of mind that their shipments will arrive at their destination safely. We can also help you negotiate freight charges for the best shipment value. To learn about our services, contact us now by clicking here or calling (+632) 8525-9775.
The COVID-19 pandemic has crippled various industries worldwide. This led to many companies scrambling to keep their business afloat amid uncertain times. Contactless transactions have become the norm, and the adoption of modern solutions has significantly increased as organizations pivot to remote work and digital commerce.
It’s been more than two years since the first wave of the pandemic hit the globe, and freight forwarder international firms have slowly recovered since then. But a recent COVID-19 outbreak in China has brought new uncertainties in the global supply chain, with the sudden increase in cases causing worker shortages in ports and important factories across the country.
The Latest COVID-19 Outbreak in China
After easing their harsh zero-COVID policies amid the wide protests in big cities, China has faced what many experts consider the worst COVID-19 wave recorded. Authorities in the country estimated that almost 250 million individuals contracted the virus during the first 20 days of December 2022, making it the fastest rise of COVID patients in the nation since 2020.
This unprecedented situation has led to businesses needing to close down again, as most of the workforce is infected or exposed to an infected individual. Reports also said that medical establishments are overwhelmed by the situation, most of which are struggling to cope with the sudden spike in COVID cases right after the government became lenient with their COVID prevention policies.
Effects on the Global Supply Chain
As home to some of the biggest ports around the world, there is no wonder that the latest COVID surge in China significantly affected the world’s supply chain. Some crucial ports like Shanghai and Shenzhen have recorded a notable increase in shipment cancellations rate, with reports expecting it to go up to 31%. This came as factories found it hard to operate with limited people, especially with many reporting that more than half of workers were infected with the virus.
The latest COVID surge in China also further decreased the demand, which was already down before the fiasco, for goods and raw materials coming from the country. This led to domestic and international factories experiencing delays in procuring products and consumers seeing a shortage in supply for some necessities.
The lack of workers and reduced demand has also led to shipping companies decreasing the number of cargo ships sailing. The delays in the acquisition of freights have significantly contributed to the growth of blank sailings, referring to shipping firms skipping one port or altogether canceling their ship’s voyage. This causes delays in the delivery not only of goods but also consumer parcels in many parts of the globe.
Conclusion
As economies continue to bounce back from the crippling effects of the COVID-19 pandemic three years ago, new disruptions brought fresh challenges to the global supply chain. China’s latest COVID surge led to factories operating at limited capacity and ports experiencing bottlenecks. Countless Chinese manufacturers could not complete orders in time, and freight rates plummeted along with it.
The fear of another COVID-19 outbreak is already expected, especially with the country celebrating the Lunar New Year in late January 2023. But reports show that port congestion and freight procurement have improved in recent weeks, with pickup charges increasing by almost 10%. This can be a good sign that the supply chain will gradually go back to normal, despite the worries of another COVID surge in China.
Looking for a Reliable Freight Forwarder in the Philippines?
The whole shipping fiasco can be daunting for Filipino importers and exporters, but partnering with a reliable freight forwarding company can help you navigate the possible hurdles you’ll encounter. Excelsior Philippines has been in the industry for more than two decades, providing our clients with peace of mind that their shipments will arrive at their destination safely. To learn about our services, contact us now by clicking here or calling (+632) 8525-9775.
Import and export of goods via trade is the heart of every economy in the world, which is why international freight forwarding organizations are some of the most importance firms around. International freight forwarders closely work with sellers and buyers in different countries to make sure that goods get where they need to go.
International freight forwarding companies act like the middlemen of the trade, helping both sides ensure the success of shipping. They strictly follow freight forwarder international standards which helps guarantee that the goods will be delivered on time. So, if you are a merchant or consumer that wonders how freight forwarders work, here is a step-by-step guide to help you out.
Stage One – Export Haulage
Export haulage is the process when an exporter moves their cargo to the freight forwarder’s warehouse. The forwarder use trucks or trains are used to move the cargo and might take a few hours to a couple of weeks depending on the location and other external factors.
Stage Two – Checkpoint
Checkpoint is the process of checking goods for damages or irregularities. When the export haulage stage is over, the freight forwarders who are getting the goods will check the shipment to make sure that the goods aren’t damaged in transit.
Stage Three – Export Customs Clearance
Every cargo requires clearance from the country of origin before being transported to another nation. Custom brokers do this by submitting details and supporting documents about the cargo. If a freight forwarding company does not offer this service, it is required to find a third-party customs broker service to help with the process.
Stage Four – Import Customs Clearance
The country where the shipment is going has to check the import customs documents once the shipment gets there. The freights forwarder or the customs broker chosen by the shipper can get this done before the cargo arrives as doing so can expedite the next steps of the shipment.
Stage Five – Destination Arrival and Handling
This is the stage where the cargo finally arrives and is taken care of by the freight forwarding company. Once the cargo arrives, international freight forwarders will receive documentation about the shipment from the office at origin. Here, the shipment is also transported to the forwarder’s warehouse before getting delivered or picked up by the buyer.
Stage Six – Import Haulage
This operation moves the merchandise from the warehouse to the intended receiver’s final location. Freight forwarders usually help deliver the merchandise to the shipping address. However, the consignee can also choose to pick up the shipment directly from the warehouse should they wish to.
How do Freight Forwarders Work?
Many people would think that freight forwarders have planes or ships they use to transport cargo vessels. However, this is not always the case. Instead, these companies simplify the process for both importer and buyer as they act like the main point of contact for these people throughout the shipment process.
The freight forwarder takes care of all the details of the shipment from start to finish. This includes tracking the arrival of the cargo ship and getting in touch with trucking, airline, or shipping companies to make sure the shipment is picked up and delivered on time. The freight forwarding partner handles all of these details and tells clients what they need to know.
Deliver Your Goods Using an Experienced Freight Forwarder
Excelsior is an international freight forwarder with 20 years in the industry. Our company is present in across Luzon, Visayas, and Mindanao and will make sure that your cargo is being transported at the right time safely whether by land, air, or sea. If you want to have your goods delivered by professionals, you can contact us at (+632) 8525-9775 or visit our website at https://excelsior.ph.
The COVID-19 crisis and the Ukraine War heavily disrupted various supply lines worldwide. Different countries already had different laws and regulations in place that usually changed frequently, and the pandemic brought with it more regulations that customs brokers needed to navigate through. The war in Ukraine made things worse thanks to sanctions and the closure of air, sea, and land routes, among others, that disrupted shipping costs and the overall shipping process.
Even if crises are occurring anywhere in the world, businesses still need to import and export products to continue their operations, and it’s the customs broker’s job to ensure that the shipments get to their target destinations.
Customs brokers are vital parts of a supply line, and the following are some of the reasons why they’re critical in crises:
They are Knowledgeable about the Changes in Shipping
The COVID-19 pandemic changed freight requirements and regulations in line with the closing of borders and other changes in line with the pandemic. Because of this, customs brokers had to keep up with the changing rules and ensure that the shipments were delivered and received in compliance with regulations.
The war in Ukraine further negatively affected shipping, on top of the already difficult situation with the ongoing pandemic. Not only did fuel costs increase, but fast and efficient shipping corridors were also no longer safe for shipping, so international freight forwarding companies had to use other routes through other countries to ship cargo. New routes mean new regulations to keep in mind and a few new challenges.
Customs brokers must stay on top of changing regulations and new challenges as they adapt to new language barriers and document processing procedures to ensure that cargo and freight get to their target destinations. They can offer different transport options to ensure the timely arrival of shipments. Without customs brokers, freight forwarding companies and shipping lines will have difficulty with their shipments.
They can Handle the Documentation Process
The documentation process has always been a necessary pain to deal with for shipments. Many business owners had already had a stressful experience dealing with the required documentation before the pandemic started, and the war in Ukraine practically redrew route maps. The process is even more stressful now because previously established processes have changed.
Businesses can rely on reliable customs brokerage services to handle documentation. A licensed and reliable customs broker is versatile and can help open new opportunities because they know how to handle the documentation process. This also guarantees that shipments will arrive on time and businesses won’t miss deadlines.
Customs brokers already kept costs down before the pandemic started, and they still do so to this day. Without customs brokers, businesses will have difficulty with their imports and exports. Customs brokers can also more readily adapt to the changes in the documentation process because they know all the necessary documents and the most efficient ways to prepare them.
Conclusion
Customs brokers are critical to keeping businesses from wasting money with missed deadlines to other costs resulting from the difficulties that sprung up from different crises. The world still hasn’t recovered from COVID-19, and the ongoing war in Ukraine made logistics worse as different shipments continue to sit in ports for weeks or months, so reliable customs brokers and freight forwarders, by extension, are necessary to keep the supply line up and running.
Without customs brokers, businesses will have difficulty importing and exporting products. Let Excelsior Worldwide Freight Logistics help you handle the following customs services on your behalf:
Prepare important shipping documents
Filing & processing customs entry
Expedite delivery of imported cargo to clients
Excelsior Worldwide Freight Logistics conducts free orientation for anyone willing to learn about import and export. It is our advocacy to share our knowledge & experience of more than 17 years in the business. Visit our website today at www.excelsior.ph to learn more about our service.
After multiple countries restarted their economies after years of being under lockdown, the maritime industry saw an increase in demand as businesses wished to press on and leave behind the turbulent times of the pandemic. This led to increased fuel costs that negatively affected the shipping industry as high fuel costs resulted in high shipping rates.
Shipping and freight forwarding companies had to raise shipping rates in response to high fuel prices as early as the last quarter of 2021. Even though shipping costs rose after economies reopened, this was still a sign that international trade was starting to return to normal. Still, another crisis popped up in the early months of 2022 that hit international freight.
On February 24, 2022, under the guise of a special military operation, Russia essentially invaded Ukraine. Russia was then struck with different sanctions that affected a lot, including Russian oil getting cut off from the market and further driving both oil and gas prices up. The current war did not only affect oil and fuel prices as international freight took a bigger hit thanks to the sanctions, cancelled flights, extended flights, and inflation.
In addition to the war in Ukraine, the current tensions in Taiwan can also affect the current state of global shipping as China’s People’s Liberation Army continues its military drills that simulate a blockade on Taiwan. This is after US House Speaker Nancy Pelosi visited Taiwan.
Ukraine War and Chinese Military Drills of Taiwan
War in Ukraine
Air transport is by far the most affected by the Russia-Ukraine War as multiple airlines reduced or stopped their operations between Europe and Asia. Those that continued their operations had to use extended air routes as both Ukrainian and Russian airspaces are currently closed. Thanks to extended air routes, airlines had to use more fuel, contributing to both higher fuel prices and skyrocketing prices of goods.
A screengrab of the current state of air traffic in Ukraine. Note the lone aircraft in the middle of the Black Sea. Due to sanctions, all airlines either avoid or skirt the Black Sea to avoid going into Russian airspace. Any aircraft in the middle of the Black Sea are likely military aircraft. Photo from live flight tracker Flightradar24.A screengrab of a longer flight path taken by a BELAVIA Boeing 737-8K5flying from Antalya to Minsk. Photo from live flight tracker Flightradar24.
Land freight that relies on routes going through Russia, Belarus, and Ukraine to go to and fro the European Union, China, and South Asia no longer has any safe overland routes. This means that international freight forwarding companies will need to use different routes through the UAE, Serbia, Turkey, or Romania. Customs brokers will also need to adapt to the different language barriers and document processing procedures.
The war on Ukraine also affected maritime routes in both the Sea of Azov and the Black Sea, as the routes are no longer safe. Several merchant ships have been attacked off the coast of Ukraine, making it certain that sea freight will be unreliable until the war ends. Although Russia and Ukraine recently signed a deal to allow grain shipments to move through the Black Sea to mitigate the risks of worldwide famine. Whether this means that the sea lanes will be safe for now is unknown, but Shephard Media noted that the tentative nature of the grain deal might not significantly shift the current security situation in the Black Sea, so it might not still be safe to set sail.
Like how land freight will need to rely on other routes, sea freight will also need alternative routes, making air routes a more viable option for shippers and freight forwarders.
Military Drills Around Taiwan
The blockade on Taiwan also further limited the remaining available air routes as China warned airlines to avoid flying in areas around Taiwan where the military exercises are currently held. China has also designated certain six areas of airspace as danger zones that all civilian aircraft must avoid.
Graphic representation of the areas where the People’s Liberation Army (PLA) plan to hold military drills. Photo provided by the People’s Liberation Army.
While airlines have cancelled flights to Taipei and have rerouted other flights to avoid the airspace in the past few days, air traffic has just returned to normal, at least on August 8, 2022.
Even if air traffic has returned to normal, some disruptions are still expected as military drills continue around Taiwan. The extended military drills can herald a “new normal” for freight and shipping off Taiwan.
The ClarkSea Index is a barometer of shipping fortunes, and during the War in Ukraine, it’s seen that the earnings of the shipping industry improved as the cost of shipping increased. The chart focuses only on tankers, bulkers, containerships, and gas carriers, but it’s safe to say that even the cost of shipping through the air has also increased.
The flight restrictions in Ukraine and Russian airspace effectively removed about 10 million miles of airspace and international freight routes utilized by 20% of the world’s air cargo. This resulted in longer flights and lower air capacity as carriers took alternate routes or canceled flights altogether.
If the military drills off Taiwan continue, there is a chance that the supply chain will further be negatively affected by increasing the cost of goods and causing certain shortages.
Skyrocketing prices
As shipping and freight forwarding routes were negatively affected by flight restrictions and the redrawing of route maps, the cost of transporting goods also increased as freight forwarders, and shippers had to use different routes and use other means to adapt. Longer and alternative routes will jack up fuel costs and then jack up the cost of the goods themselves.
The cost of fuel and energy reliant on fossil fuels already rose due to the higher oil prices, and the cost of other goods will only continue to skyrocket as transportation routes remain restricted. Some food prices, for one, have already eased but still remain high, but things can change if more routes end up getting closed off.
When the war in Ukraine started, there was speculation that electronic vendors might raise prices while using Ukraine as an excuse. PC Gamers didn’t exactly see this change in prices as both GPU prices and cryptocurrency crashed, and other PC parts didn’t see any price increase, at least not significant enough to warrant attention if there was any. However, because Taiwan is export-focused and its main products include electronics, there is arguably a bigger chance of prices increasing if exports are disrupted. Taiwan’s other products include the following:
electronics
information
communication and audio-video products
base metals
plastics & rubber
machinery
Taiwan’s chip manufacturing industry will also be affected as China halts its sand exports to Taiwan. The continuation of military exercises and the rerouting of sea and air freight to the country, halts in sand exports to Taiwan, and possible complications if the situation worsens can negatively affect the prices of electronics and PC parts.
For simplicity’s sake, it’s safe to assume that prices for multiple products will only skyrocket when multiple conflicts are happening that can disrupt the supply chain. As long as the war in Ukraine continues and if the situation in Taiwan worsens, there will be shortages, and price increases and the world will need reliable freight forwarders and customs brokers to keep the supply chain up and running.
Conclusion
Everyone involved in the shipping and freight industry will need to adapt to ensure that they can continue their operations amid different crises and supply chain disruptions. Shippers can only adapt to the situation and look for other transportation routes, hire competent customs brokers to ensure that shipments reach their intended destinations through the new routes, and futureproof their operations.
Excelsior Worldwide Freight Logistics constantly endeavors to be a company of enduring greatness by providing only time-conscious, client-oriented, and exceptional delivery service. We also conduct free orientation for anyone who is willing to learn. It is our advocacy to share our knowledge & experience worth more than a decade in the business. Visit our website today at www.excelsior.ph to learn more about us and our service.
The Philippines is currently seeing high fuel prices, and the public transportation sector is currently reeling from the effects as drivers are forced to pay for expensive gas. Although rollbacks could happen in the future, it won’t change the fact that fuel costs are still high worldwide.
From regular commuters to international freight forwarding companies, many people are heavily affected by rising fuel costs that effectively increase gas prices, transportation rates, and shipping costs.
Why is Gas Expensive?
Increased Demand After Strict Lockdowns
The price for crude oil initially went up when the demand for oil and gas returned as the global economy emerged from strict COVID lockdowns. Both oil and gas prices went up as major economies reopened. Because the Philippines is a net oil importer, gas prices in the country will naturally go up when international oil prices spike.
United States – 18.88 million barrels per day or 20% of the world’s total
Saudi Arabia – 10.84 million barrels per day or 11% of the world’s total
Russia – 10.78 million barrels per day or 11% of the world’s total
Canada – 5.54 million barrels per day or 6% of the world’s total
China – 4.99 million barrels per day or 5% of the world’s total
These five countries contribute 53% of the total world oil production, and anything that can affect both the production and sale of these countries’ oil will affect the cost of oil. Since oil becomes fuel when refined, expensive oil will then become expensive gas.
While the initial oil and fuel price hike were because of the increased demand, the situation worsened thanks to the Ukraine war.
Russia’s Invasion of Ukraine Cut Down Oil Supply
Because Russia invaded Ukraine on February 24, 2022, the world responded with multiple sanctions to penalize Russia. Due to the sanctions imposed by the European Union, the United States, and other economies, Russia has been selling less oil in the market, resulting in lower supply and higher prices.
Europe started ditching Russian oil by reducing the amount of oil they buy from Russia while shopping around for alternative sources. Some countries still buy some Russian oil because they have become too dependent on it, making it hard to look for alternatives. Because there aren’t enough oil alternatives in the market due to oil producers winding down production, oil prices will remain high until Russian oil returns to the market.
As the war sees no sign of ending anytime soon, it’s unlikely that the global oil supply and prices will return to normal anytime soon.
Effects on the Freight Forwarding and Shipping Industry
Even before the Ukraine War, shipping operators in the Philippines had already imposed bunker fuel surcharges to recover from high fuel costs. Fuel accounts for a freight forwarder and shipping company’s operating costs, so they’re recovering the losses through surcharges. In fact, the Philippine Civil Aeronautics Board has already upgraded the passenger fuel surcharge to Level 4, which equates to P108 to P411 per passenger for one-way domestic flights and P543 to P5,026 per passenger for one-way international flights.
The current surcharge is Level 11, which equates to P355 to P1,038 per passenger for one-way domestic flights and P1,172.07 to P8,714.84 per passenger for one-way international flights. Cargo fuel surcharge is also Level 11, which equates to increases of P1.82 to P5.34 per kg for domestic flights and P6.03 to P44.80 per kg for international flights.
Adding the war in Ukraine to the equation, fuel prices will naturally go up. Philippine Multimodal Transport and Logistics Association, or PMTLAI, president Marilyn Alberto noted that trucking costs would continue to spiral as fuel costs continue to increase. International air freight forwarders in the European Union and the United Kingdom were barred from flying in Russian airspace, creating difficulties in going to East Asia, effectively increasing fuel consumption which then increases fuel cost and transit times.
Alberto said that even if the Philippines does not make any significant trade with Russia and Ukraine, the country will still feel the ripple effect of the following:
Higher fuel costs
Long transit times
Suspension of services
Delays due to inspections of cargo bound to Russia to comply with sanctions
The ripple effect increases air and ocean freight rates due to longer container routes, high fuel prices, and possible high surcharges.
Conclusion
The reopening of multiple economies increased the demand for fuel and oil, resulting in higher fuel costs. Both the Ukraine War and the ripple effect of lower oil supply and longer transit times also added to the already high fuel costs. The cost of international freight forwarding will remain high, and it will take time for it to go down. Even so, freight forwarders and logistics companies will continue to operate, and it’s more important than ever to rely on a reputable company.
Excelsior Worldwide Freight Logistics conducts free orientation for those willing to learn. It is our advocacy to share our knowledge & experience worth more than a decade in the business. Visit our website today at excelsior.ph to learn more about our service.
