How Do Shipping Costs from China Compare with those from Mexico?

Conventional wisdom tells us that shipping across shorter distances will cost less, and therefore, it’s better to outsource manufacturing to a country that’s closer to our market. We might also suspect that supply line disruptions are less likely to occur when our supplier is closer to our market. For these reasons and a few others, […]

Conventional wisdom tells us that shipping across shorter distances will cost less, and therefore, it’s better to outsource manufacturing to a country that’s closer to our market. We might also suspect that supply line disruptions are less likely to occur when our supplier is closer to our market. For these reasons and a few others, many outsourcing companies have started to look away from China towards Mexico. But if practical experience teaches anything, it’s that conventional wisdom is not always correct. So, we at Genimex decided to compare shipping costs from China and Mexico. What we found was a complex array of factors that business leaders must fully understand before determining the best strategy for their company.

Factors to consider when comparing shipping costs of China and Mexico

Our analysis assumes that if your products are coming from China, they’ll cross the ocean by ship. But if you’re outsourcing to Mexico, your goods are probably coming into the United States on trucks. It’s a bit of an apples-to-oranges comparison, except that single, 40-foot containers are the size of a semi-trailer. Thus, it’s reasonable to compare the cost of a container and the cost of a fully loaded truck (FLT).

We chose Shanghai as our representative Chinese port, along with two industrial locations in Mexico, Puerta Altamira on the Gulf Coast and Puerta Manzanillo on the western edge. The following chart shows the cost and time to ship to two major US destinations, New York City and Los Angeles. Shipping costs are based on published rates for February/March of 2024.

Origination Destination Lead time Container Cost
Puerta Altamira NYC 1 week 7.8k
Puerta Manzanillo NYC 1 week 9.3k
Shanghai NYC 6 weeks 7k
Puerta Altamira LA 1 week 6k
Puerta Manzanillo LA 1 week 7.3k
Shanghai LA 3.5 weeks 5.2k

 

In each of these estimates, China is the lower-cost option but takes much more time. Since time is money, companies would have to decide whether to prioritize savings or speed. Another factor to consider is that equipment availability in Mexico fluctuates, but companies wishing to save on shipping costs can usually rely on China’s shipping schedules which are generally precise.

By the way, these costs only get your goods into port. There will inevitably be inland shipping costs added on. This is where Mexico can gain another advantage because routes to interior American destinations would be even shorter than the trip to NYC. Additionally, goods entering an ocean port must pay port fees and other surcharges.

Of course, any comprehensive analysis must account for other factors that impact cost, reliability of the supply chain, and even brand identity. Consider these issues:

  • Customs and regulations — The US-Mexico-Canada Agreement simplifies trade between Mexico and the United States, reducing delays through customs and tariffs. But to gain these advantages, companies must provide thorough documentation in compliance with regulations. Mexico Export Customs are very strict, so a manufacturer must have all the correct documents to clear export customs or will need to go through a third-party trading company which can be expensive. Goods imported from China draw greater scrutiny and are subject to a complex web of international regulations and protective tariffs due to trade tensions. Companies that provide proper documentation and comply with customs can avoid delays and extra charges.
  • Capacity and availability — Trucking capacity from Mexico fluctuates based on demand, season, and economic conditions. It helps to plan and build relationships with reliable carriers, so your goods are not left waiting. From China, ocean freight capacity is steady and reliable, though the run-up to the Lunar New Year presents shipping challenges. Fortunately, this is a predictable, annual occurrence, which companies can incorporate into their schedule. COVID raised awareness of the potential for global supply chain disruptions, which can affect container availability and shipping rates. However, responsible parties on both sides of the Pacific have been working diligently to remedy deficiencies that exacerbated the COVID delays.
  • Environmental impact — Companies who cater to green-minded consumers and hold themselves out as “small footprint” manufacturers, must ensure they are employing the most sustainable practices available. Trucking produces greater carbon emissions per ton-mile compared to ocean freight, but companies must also consider the impact of inland freight to understand the full picture.
  • Risk and resiliency — The risks of overland truck transport include traffic delays, accidents, and the perils of inclement weather. Reliable carriers should work to mitigate these risks, but trucking companies are notorious for playing fast and loose with the regulations of the Federal Motor Carrier Safety Administration. Ocean freight is occasionally subject to weather-related delays. And, though there are corners of the world where pirates regularly attack container ships, Pacific Ocean traffic is free of such risks.

Companies must evaluate each of these factors carefully, as part of a thorough contract manufacturing strategy. Companies must also consider the cost and quality of labor, availability, and cost of raw materials, fuel costs, the quality of manufacturing facilities, and much more. At Genimex, we help client companies understand the broad implications of strategic choices, so they can optimize their shipping strategy and have confidence in every link in their supply chain.