Point A to B – Freight, Port Fees & Tariffs
Figuring out how to fulfill a game, and how much it costs, is a challenge. Duty, and tariffs vary by geography, and there are a slew of logistical questions from how many and what hubs to ship from, who to use for fulfillment, and when to split shipments (at the manufacturer or on from a local fulfillment center).
While this won’t be the final resource on understanding how to freight a game, my hope is that it is a good place to start. In the future – as our institutional knowledge and experience expands - I’ll put together more in depth analysis on specific elements of global fulfillment.
Special thanks to Ed Healy at Gamerati for helping us piece together this article – as we are in the process of figuring out fulfillment for our upcoming campaign Nut Hunt. [Ed can be contacted directly with inquiries at ephealy@gamerati.biz].
Ex Work versus Free on Board
The first thing you’ll need to figure out is where your manufacturer hands off ownership of your game. You can ask your manufacturer to manage your freight process to local fulfillment, but this is uncommon.
Usually, you’ll be taking delivery Free on Board or FOB to a local port. For instance Meijia (who we expect to use for manufacture) quotes FOB to Shanghai.
Ex Work (EXW) means you take delivery at the assembly facility and arrange your own freight to a local port (and then onward).
Freight Forwarding
If you are an indie publisher, you’ll most likely work with a freight forwarder to take your games from port facilities to fulfillment warehouses in local markets.
To estimate freight, you’ll need to estimate your game weight, games per pallet (value per pallet), and pallet dimensions. However, for most games, the size of the game is going to be the constraining factor in terms of freight cost per game (this may not be the case for very dense games).
The best way to get a bead on games per pallet is just to ask the manufacturers you query how they would palletize the games, as well as the dimensions of the pallets. Alternatively, you can ask around on forums how other publishers’ games were palletized. As a point of reference, one way to palletize a Catan sized game (295x238x79mm box), is 4 games per carton, 48 cartons per pallet (192 games), on a 1.30x1.10x1.15m pallet.
To figure out your game weight – I would recommend googling the weights of games with similar component skews and box sizes or get a kitchen scale and get to weighing meeples. Then add some weight per carton to be conservative.
Once you have your weight and pallet dimensions you can plug them into Freightos’ Calculator.
Estimate as of 05-31-2022
The example shown is an estimate for freight for 5 pallets (1,080 games) of Nut Hunt from Shanghai to Gamerati’s warehouse in Washington. The unit cost is $2.97 per game. Note that this is the lowest cost option (not fastest) and does not include insurance.
Economies of Scale
Freight, like manufacturing, is a large beneficiary of economies of scale. I queried Freighto’s calculator for 1, 5, and 10 pallets of our game going to Washington (Gamerati) and Germany (CSS’s location). The per unit cost to ship 1 pallet of games is over 2x the per unit cost of shipping 10 pallets.
Estimates as of 05-30-2022
Cover Bids
Before making board games I spent over a decade in finance, mostly at a hedge fund. Why buying bonds (and other securities), there’s a concept called the cover bid. That is the second-highest (or first non-winning) bid.
A cover is theoretically where the winning bidder could turn around and sell their security. Covers are used in valuation (for carrying value on your books), and how tight cover bids are tells you a lot about price discovery, liquidity and risk.
We’re all intimately aware of macro risks that can impact the price of freight. When planning your pricing, I’d also be acutely aware of how tight or wide the market is.
For instance, the most competitive quote for one pallet from Shanghai to Germany seems to be an outlier. I’d anticipate freight to be closer to $6 per unit, plus or minus any macro volatility from now until when we ship.
Price Volatility
2021 taught all of us how at risk global supply chains can be.
While macro indices are useful, it is also useful to periodically check freight costs for your specific skew. Even checking day over day (05-30 to 05-31) our low price for 5 pallets of games (about 1000 games) $2,989 to $3,214.
This is normal short-term volatility and can give you more surety that you aren’t basing your pricing estimates off of an outlying low bid. This should give you higher confidence in freight rates relative to global indices.
Although I haven’t looked into it personally, I am sure that it is also possible to lock in forward freight rates. Depending on the structure of a contract this could be either as an option (buying the right to freight at a given rate), or a future (forward purchasing freight).
While this could seem attractive on paper (surety is good), a cautionary word of advice. Derivative pricing (options and futures) are tied to volatility and time. So, pricing will be highest when we are coming off a period of high volatility (like the past couple of years), and when buying farther in the future.
It might be worth looking into - but my gut is that most publishers will be better served by pricing in appropriate margins and shouldering freight price volatility risk.
If you are very risk averse, you could open your backer kit close to fulfillment, and explicitly tell backers that they are shouldering some of the volatility from freight. I wouldn’t recommend this second approach, but I could imagine scenarios where publishers would choose it.
US Port Fees & Tariffs
Costs for importing games into the US are de minimis. Unless your game is coming from a restricted country (North Korea or Cuba), there is no import tariff imposed on games.
Ed Healy at Gamerati put together a useful tool for calculating import costs. Note that the COGs in the calculator is the Cost of Manufacture (total amount you pay your manufacturer) it does not include freight costs.
Customs & Inspections
It’s important to keep in mind that all of the estimates we’ve talked about so far are the “nothing goes wrong” numbers.
Shipments can be pulled for inspection incurring additional costs and delays.
To reduce this risk it is important to make sure that your labeling and documentation is squared away.
Here are some resources that another publisher (Ben Downton / Micro Dojo) shared with me for the EU & UK (CE testing will require separate documentation):
When we are closer to fulfillment, I’ll have a firmer grasp on the various labeling and documentation needed by geography, and will put together a follow up post with details.
VAT, GST & Friendly Shipping
In most domiciles either you, or your backers will have to pay VAT or GST (duty & tax). In the EU you pay a VAT at your point of import, and then when shipping between EU countries you pay VAT at each country you ship into and get rebated the original VAT. This is important as each country has a different VAT rate.
In the EU you’ll also need to register for OSS, which is an electronic portal for handling VAT. Your local fulfillment partner should be able to help you with that process (quotes we got are about a €300 one-time fee).
Most campaigns have a limited number of countries with “friendly shipping” these are countries for which the GST and VAT is rolled into the shipping rate, so backers don’t need to worry about paying their own duties, and can receive their games without hassle. Common countries to include are Australia, Canada, China, European Union, United Kingdom, and the United States.
VAT & GST for those counties are:
Remember, VAT & GST are assessed off of the full value of the product (price paid by the consumer including shipping), not the manufacture or landed cost.
Note, that for non-“friendly shipping” geographies, backers will be responsible for any duty or tariff on top of the cost of your product and shipping.
Some Closing Thoughts
I’ve found it difficult to find a centralized source to puzzle out the intricacies of global fulfillment. My hope is to delve deeper into the topic and make some useful excel sheets to help future indie publishers. Things like localized cost of freight, ways to plan hubs, and what labels you need on, and documents you need with, your cargo.
It will never be one-size fits all, as often you’ll need to compare direct freight rates when splitting shipments with the cost or re-directing partial shipments (for instance, it is more economical for us to freight a large order to the US and then truck a few pallets to Canada (including fees) rather than split a shipment at the manufacturer).
What are your burning questions do you have on global fulfillment and freight?
