Understanding Freight Shipping & Management Charges

As a cargo owner or shipper, viewing a list of shipping costs you barely understand on your invoice can feel quite daunting, and rightly so. Freight and supply chain management can be a complex process with various costs that apply for different types of cargo, modes of transportation and destination countries.

At OnePort 365, we believe it is important to familiarise yourself with the shipping charges to save your business some time and get favourable shipping cost totals. In order to give you insights into your overall freight expenses, we explain the freight costs you may encounter at the port terminal, interlands and maritime including those involved with moving your cargo from warehouse or factory to the port. In this article, we discuss the common freight charges and some less frequent costs that may be imposed on the shipment.

Inland, Port and Terminal Charges

• Cartage covers the transportation of cargo from your factory or warehouse to the port of departure. This fee is determined by the distance between these locations.
• Wharfage Charge is imposed by the port authority for the utilisation of their facilities to load or unload cargo from a vessel. The charge is levied directly and payable by the cargo owner.
• Terminal Handling Charge (THC), charged by both the origin and destination port, covers various activities involved in checking your cargo in for departure, moving it to the vessel and loading the container on board and vice versa. The port bills the shipping line, which in turn bills the shipper.
• Custom Duties and Tariffs — All cargo needs to be declared at the port of destination. Duties and tariffs also vary by country, existing trade agreements as well as types and value of goods being transported. At OnePort 365, we understand that navigating the customs procedures can present some challenges. Hence, we provide you with customs brokerage services.
• Demurrage and Detention Fees — The demurrage fee is charged by the shipping line after the free period of offload and storage has elapsed. The fee applies each day until pickup. Detention fees also apply daily to any delay in returning the empty container.
• Chassis Usage Surcharge — This is the surcharge fee charged by the shipping line as part of the movement which depends on the weight of the cargo.

‍Maritime Charges

• Ocean Freight is the basic freight shipping cost that covers the movement of the cargo from one seaport to another. These costs are charged based on the size of the container( 20’ or 40’) and calculated from the loading at the origin seaport to discharging at its destination. Ocean freight rates for the same route vary by shipping line and are dependent on operating costs, container costs and more.
• International Ship and Port Facility Security Code (ISPS) was implemented post the 9/11 attacks to help protect and monitor sea ports. This is charged by the shipping line.
• Marine Insurance protects your cargo against loss or damages while in transit using ocean or air modes of transportation.
• Bunker Adjustment Factor (BAF) relates to the fuel used by the vessel transporting the cargo. The fee depends on the change in oil prices and the size of the container. The fee is generally the same across shipping lines.
• Low Sulphur Surcharge: Many ships use fuels with low sulphur content due to the green initiative which aims to reduce carbon emissions. This low sulphur fuel is more expensive than the regular bunker fuel. This fee is levied to help carriers pay for the low sulphur fuel.
• Currency Adjustment Factor (CAF) is charged by the shipping line to cover foreign exchange losses that occur as a result of the need to convert their costs and revenues

There are lesser known charges that may be imposed, and these include:

• Seal charges — All containers are required to be sealed to ensure they are correctly closed and locked. The charge covers the seal. Different countries require different seals, hence it is important to ensure the correct seal is used for both origin and destination ports in order to avoid penalties on the container.
• Emergency Risk Surcharge — The surcharge is applied to cover for extra precautionary measures in regions with higher risks of piracy or acts of war. These regions include the Middle East, West Africa and the Malacca Straits.
• Arbitrary Charge — This is a fee charged by the shipping line for transporting the container from the discharge port to the location of delivery. This is usually done by third party feeder freights.
• General Rate Increase (GRI) — The GRI occurs due to a spike in demand for specific trade routes. The increase is charged in order for the shipping line to cover additional operational costs.
• Peak season surcharge — During what is considered peak seasons, shipping lines charge an increased basic rate and an additional surcharge to cover increased operations.
• Congestion Surcharge — Some ports are highly congested which means that vessels are delayed at anchor and unable to berth for days in some cases. The surcharge levied by the carrier compensates for revenue lost during the delay at anchor.
• Manifest Correction Fee — This is a fee charged by a carrier when a request is made for the amendment of shipping details already manifested. The charge is due to the additional administrative work required to amend the manifest and ensure that the updated manifest is confirmed at the discharge port.
• VGM surcharge — Verified Gross mass(VGM) is the total weight of the cargo being shipped. It includes dunnage and bracing plus the tare weight of the container carrying this cargo. These charges are being implemented by the Safety of Life at Sea(SOLAS) detectives. It became effective as at July 2016 that amendment covering container weighing regulations, a packed container will no longer be allowed to be loaded on board vessels unless its Verified Gross Mass (VGM) has been provided by the shipper to the ocean carriers and/or port terminal representatives prior to the load list cut-off date.

These are some of the charges you can face as a shipper. It may feel overwhelming, however, with the right freight management partner, it need not be complicated. It is important to note that not all of these charges will be covered in the quotation provided by the shipping line. We will help you understand all line charges and ensure there are no hidden costs.

Contact us today to get instant quotes including all surcharges. Also follow us on LinkedIn and sign up to our newsletter for more freight management insights.