Driving a truck to the pier, loading the supply chain cargo on the ship, and then taking it from port to port seems like a very straightforward and easy process. However, this act of shipping something from point A to point B has many layers, and shipping freight rates are determined by how different components work together to assist the shipper in navigating the journey to make it a smooth experience for all the parties involved.
International ocean freight shipping rates determine the ultimate cost of shipping goods around the world. These rates reflect the fact that 90% of cargo is transported by ship because it is cheaper for the largest units, and it is becoming more reliable. Also, since 2012, ocean rates have dropped by about 75% because fuel prices have steadily declined and due to the overproduction of ocean carriers there are just too many ships available. This lack of goods for transport should equal out in about the year 2025.
In any shipping agreement, the contract for transporting goods is between the buyer and the seller of goods. In the middle of this transaction is the mechanism that provides the movement of goods from one place to another. With international freight shipping companies, this movement is usually by sea. The costs for this service is borne by both the shipper and the receiver. It is up to the shipping logistics planners and the freight forwarding companies to ensure that both parties to this contract move the goods at the lowest costs without sacrificing the safety and security of their merchandise.
Why Use Ocean Shipping?
Using ships to move cargo has both upsides and downsides, but overall, it is the best way to move merchandize that weighs in at above 500 kg. This weight limit is too heavy and expensive for most other modes of transportation. Weights less than this, between 150 kg and 500 kg works well for air, rail, and trucks, and anything lighter should be shipped via air freight.
Ocean going vessels have more capacity and volume than other modes of transportation, and they have fewer restrictions. When shipping internationally, the shipper has to pay attention to international law, national law, and carrier organizations. However, there are not the more restrictive measures that are imposed on air travel due to the presence of gases, flammable products like perfume and computers, toxic items such as batteries, and biochemical hazards like chemical medicines. Shippers use the ocean routes because the ships can carry more containers and a larger variety of goods.
The downside of using ships is that they take longer. Usually, a trip will take 20-30 days, whereas an airplane shipment will be about 8-10 days. In addition, reliability may suffer because there can be port congestion, customs delays, and even problems with the weather. In ocean shipping, containers can be misplaced or parts of containers directed to the wrong destinations if the container is not a full one. In this case, goods can become damaged or destroyed. The likelihood of a container falling off the ship does happen, but it is very seldom seen.
Full Containers and Less Than Full Containers
Containers are the steel rectangular units that goods and merchandise are packed in. For shipping cargo over the oceans and seas it is recommended that the shipper use a full container load (FCL) to lessen the odds of something going wrong with the shipment. If the manufacturer does not have enough material for a full container, they may combine their cargo with the cargo of a different company.
This is known as a less than full load (LCL) and will lead to more paperwork for the freight forwarder, and the chances of the contents being damaged or lost when the carrier is emptied, and the packaging sent to various destinations.
Also, less than full containers may have to be stored for periods of time until a suitable companion cargo arrives, and this can lead to extra cost and even packages getting lost or misplaced in the warehouse.
Custom Security Surcharges
One of the expected charges is the Custom Security Surcharges that are imposed on freight that leaves one country and enters another. The two most common are the Automated Manifest System (AMS) and the Importer Security Filing (ISF). This is a regulation by US Customs to ensure the security of the cargo. The AMS is an electronic transmission system that lets US Customs know what is on board before it arrives in port. On the other side is the ISF, which is also an automated system, and this tracks what is loaded into a ship before it leaves the port of origination.
In effect, it is a cordial acknowledgement of the contents of the ship between these two entities. These fees are usually based on the credit rating of the shipper but often run about $10 per $1,000 of cargo value. These fees may not be negotiable, but shipping regulations do change from time to time, and it is something to discuss with the freight forwarder.
Terminal Handling Charges
Terminal Handling charges are also part of the fee structure and only apply to ocean freight. This charge includes the cost of the terminal provider’s property and access to the property, the costs of terminal labor, equipment use, and equipment maintenance.
Sometimes wharfage, the movement of containers within the terminal provider’s property, is added on as a surcharge or it can also be a pass through cost and not negotiable. This varies from terminal to terminal.
During the transportation process, the shippers and drivers are often called upon to perform tasks that were not expected when the contract was written to transport the goods. These costs can be added on as surcharges to the shipment, and it is understandable that the more the shipper and customer ask of the driver, the more it will cost.
For instance, some accessorial fees include shrink wrapping pallets or moving pallets, a truck layover if the shipper is the cause of the layover, and tolls and border crossing fees. Shipping freight charges do not always include these fees, and it is up to the experienced freight forwarder to make sure these costs are kept to a minimum.
It is important to note that although many of these fees deal with the movement of goods over land, the fees can be posted to the original shipment invoice and added on to the overall coat of the shipment.
Sometimes the invoices for the shipping costs will have space for listing these accessorial charges left blank. Obviously, the shipper might have a bad reaction once the final bill for these services arrive, and there is no explanation for the increased charges. In the overall picture of the total charges, these may or may not be significant. However, no business person likes surprises, especially the ones that cost them more money. This is an item that needs close observation when looking at the shipping logistics.
A customs broker has a very specific role in the shipping process. However, it is sometimes confused with the job of the freight transportation. The customs broker is an independent entity that acts as the liaison between the shipper and the importer to the US.
An exporter does not need a customs broker’s services. A freight forwarder is a wide-ranging term and refers to the coordination of the shipment as a whole from origin to destination. The job of the customs brokerage is to ensure that all customs paperwork is in order and that all fees are paid.
The cost of this service is negotiable, and a shipper can work with a freight forwarder to confirm this fee. Usually, the use of a freight forwarding cost calculator will make this task easier.
Pickup and Delivery
These fees can be passed on to the manufacturer and shipper unless the manufacturer owns their containers and fleet of trucks. The fee is based on picking up a loaded container and transporting it to the pier for shipment, also known as a drayage service. It may also involve loading a container onto a rail car and using that mode to transport the container to the pier.
The cost will vary depending on many factors including weight, distance, layover, and storage time. Although this is usually a flat fee, this should be negotiated if this service is needed.
Shippers have been buying insurance for cargo for many years, almost from the time shipping began. The best rates for the insurance needed for any particular shipment are usually obtained by working through a freight forwarding company.
The type of insurance a shipper needs is called cargo insurance. However, it is a good idea to talk to the insurance carrier about such items as a clarification of property rights, the responsibilities of each party’s role in the contract, and the limit of liabilities. It is always best to package any cargo in the most secure method available to ensure the safe arrival of the shipment to its destination.
It is usually the responsibility of the freight forwarding company or the logistics planner to map out the route for the upcoming shipment. Often this involves using a particular route that may have extra charges. For instance, a route through the Panama Canal might be the quickest way to go, but it may also have an extra fee attached to the use of the canal.
This route will probably be more cost effective even with the fees, but it will still be a cost that the ocean shipper will have to pay. If a shipment has to be rerouted because of a disaster or weather, this could also add to the final expenses of shipping the goods.
Container Freight Station
A container freight station (CFS) is a warehouse or a group of warehouses. In this location, less than full (LCL) containers are stored and loaded with the contents from more than one company to create a full container (FCL).
However, in addition to this basic service of moving drayage containers, the CFS can also handle other services that an ocean shipper might want to include as a part of the overall shipment. For instance, moving a container from one CFS to a different one, storing containers until they have been filled and ready for shipment, and stuffing, sealing, and marking containers for shipment.
Of course, the more services that are included, the higher the cost. It is best to have a competent logistics planner or freight forwarder on board to make sure that the shipping ocean freight rates stay in line with the company’s budget.
How Many Fees?
According to recent research, there can be an average of 20 different fees when shipping on the ocean cargo. Some of these fees are standard and are flat for each vessel, and others depend on the credit rating of the company, the weight of the cargo, the route the ship is taking, fees for logistics planning, and any accessory services that might be included in the shipping contract.
This will also include insurance costs, bunker adjustment factors, fees for customs, fuel costs, and custom brokerage fees. The additional costs mount up for each shipment, and unfortunately, they can accumulate very quickly.
The smart shipper will always look to use the services of a competent logistics planner in combination with a creative and resourceful freight forwarder. Keeping shipping freight rates manageable depends on proper planning and sound decision-making when shipping goods.
We are ASIANA USA, and we have been responsible for shipping goods all over the world. We are no strangers to understanding our role in making sure that the manufacturer or provider we work for has the most up-to-date technology and expertise to ensure that we can accept the most standard as well as the most challenging shipping imports and exports.
We work closely with the shipper to deliver the goods on time and at the best possible cost through our freight quotes. We pride ourselves on being able to analyze the bill of lading and the needs of the manufacturer and the shipment to provide a seamless and smooth journey. Call us today for a free quote and consultation at 855-500-1808.