A Guide to Understanding the Terminology about Sea Freight Rates

Posted by Port City Logistics on Nov 10, 2022 12:49:25 PM

For shippers moving containerized freight, it’s frustrating enough that you have to often wait on forwarders to provide you with a rate quote. Even after receiving it, it might sometimes feel like you need a dictionary next to your desk just to decipher the logistics terminology and acronyms in your sea rate quotes. Fortunately, we understand your pain and have compiled a list of supply chain management terms about surcharges that commonly appear in sea freight rates. 

Our guide comprises three parts, with a list of the typical fees and surcharges listed for each:

  1. Pre-Carrier
  2. Carriage
  3. On-Carriage

I. Pre-Carriage

Pre-carriage sea freight charges refer to the various transportation costs involved before port delivery and loading the container onto a vessel. Here is a complete list of pre-carriage ocean freight charges:

Chassis Pull:  The price to secure chassis equipment used in drayage services. This fee generally depends on the port, equipment availability, and whether the equipment will be returned to the same place or a different location (also known as a chassis split).

Customs Clearance: Administration fee imposed by an official customs broker for clearing the importation or exportation of goods.

Documentation Charges: A charge imposed to prepare exportation documents that may include a Certificate of Origin, Licenses, or applicable permits.

Fuel Surcharge (FSC): A separate charge added to a rate based on the fluctuating costs of national diesel prices. This charge helps offset the costs incurred by carriers for their transportation service.

Packing Charges: A charge imposed by transload and warehouse facilities for loading a container.

Wharfage: A charge incurred at a port when a steamship company uses a quay.

II. Carriage

Carriage is a term that refers to the movement of containerized freight via ocean from the loading port to the port of discharge. Here are the sea freight shipping costs that you might incur during this portion of a shipment's journey: 

Ocean Freight Rate: Ocean rates refers to the basic freight charge for moving containers from one port to another. Also known as maritime freight rates or marine shipping rates, ocean freight shipping rates are the upfront rate quoted by carriers. 

Accessorial Charges: A carrier can add these charges for any additional services required for shipping.

BOL/BL Fee: This is the fee for the Bill of Lading, the document issued by a carrier that acknowledges they have received the load for the shipment.

Bunker Adjustment Fee (BAF): A surcharge assessed by a carrier that applies in addition to freight rates, compensating for unexpected fuel price adjustments. Many commonly refer to these ocean freight costs as “Fuel Adjustment Factor” (FAF) fees. 

Cargo Declaration Data Charge:  A fee applied to prevent security and safety threats to inbound ocean shipments headed for the European Union.

Destination Documentation Fee (DDF): Some countries have additional requirements for documentation. It’s important to check this before you ship, as carriers will sometimes impose this charge if other documentation is required to process the shipment.

Destination Delivery Charge (DDC): A charge imposed by carriers for delivering full containers to U.S. ports and terminals.

Detention: Detention fees apply when a company uses a carrier’s equipment (such as containers or chassis) for longer than the allotted free time.

Emergency Bunker Surcharge (EBS): A fee imposed when market rates for fuel are higher than anticipated. Established in 2018 in response to fuel costs rising more rapidly than BAF alone could compensate for, this ocean freight prices surcharge is one of the newest of ocean freight charges on our list. 

Emergency Rate Restoration (ERR): A surcharge typically added when the cost to ship freight suddenly increases due to global events.

Environmental Fuel Fee: A freight surcharge imposed by shipping lines to offset the cost increases for operating an ocean vessel due to environmental regulations requiring lower fuel sulfur content.

Equipment Imbalance Surcharge (EIS): A fee imposed by shipping lines to cover the costs associated with repositioning a container due to weight imbalances on the vessel.

Equipment Repositioning Surcharge (ERS): This fee applies when a shipper requests that carriers reposition equipment from one location to another.

Export Service: An additional fee that can be assessed when a carrier changes the transport document.

General Rate Increase (GRI): A rate increase imposed by shipping lines when market forces strain supply and demand. 

Gulf of Aden Surcharge: Due to the risk of piracy, shipping companies add this tariff to sea freight passing through the Gulf of Aden.

Hazardous Cargo Surcharge: If you are shipping hazardous or dangerous materials, expect an additional fee that covers required documentation, handling, and shipping costs.

Importer Security Filing (ISF): A fee imposed for the documents required when shipping containerized freight via ocean to the United States. The U.S. Customs and Border Patrol requires these documents.

International Security Port Surcharge (ISPS): Fee imposed for security measures for all inbound cargo shipments.

Low Sulphur Surcharge: A fee added to most freight forwarding rates to cover the cost differential between Low Sulfur fuels and Heavy Sulfur fuels.

On-Carriage: An additional inland freight cost that sometimes occurs after the initial cost for ocean freight rates.

Ocean Rate: The basic transportation cost to ship containers from the port of origin to the destination port. (Note: Also known as “ocean freight rate”).

Origin Terminal Handling Services: A fee for port services paid before a vessel departs from the origin port.

Overweight Surcharge (OWS): A fee charged by ocean shippers when a container exceeds the designated weight capacity for its size.

Peak Season Surcharge (PSS): A surcharge imposed by ocean lines to cover increased operating costs during periods of high demand, typically from mid-August until the end of the year.

Piracy Surcharge: Due to the risks of piracy, shipping companies impose this surcharge on cargo owners as a type of insurance to offset the losses created by ocean pirates.

Port Dues: Port authorities impose this tariff against shipowners for the use of the port.

Special Equipment Surcharge (SES): A special equipment surcharge is applied when carriers are required to provide and/or handle special equipment such as refrigerated containers. 

Suez Canal Surcharge (SCS): If you are shipping through the Suez Canal, expect this additional fee, compensating shipping lines for their additional operating costs when passing through the canal.

Terminal Handling Charge (THC): A charge levied by the shipping terminals for the storage and handling of containers before they are loaded onto a vessel. 

Terminal Handling Charge incurred at the destination port: Refers to terminal handling charges levied by the destination port for the storage and handling of unloaded cargo before starting the inland transportation leg of its journey.

Terminal Handling Charge incurred at the port of origin: Refers to terminal handling charges levied by the port of origin for the storage and handling of cargo before loading onto a vessel en route to its destination port.

Additional Charges

In addition to the common carriage charges we’ve already covered, numerous additional charges may or may not apply to your sea shipping rates. These additional charges include the following:

Accessorial Charges: Accessorials are any charges added to the base tariff or base contract rate. Examples include bunkers, containers, currency, and destination/delivery charges. 

Aden War Risk Surcharge: This surcharge applies to any goods that pass through the Gulf of Aden to compensate carriers for such costs as crew risk compensation, cancellation of economical speed, and redeployment of vessels.

All-Inclusive: This term refers to the total cost to ship cargo from its origin to its destination and includes all charges and transportation costs. 

Base Rate: The base rate for shipping cargo from point A to point B (Note: also known as “ocean freight rate”). 

Bunker Charge: This surcharge compensates carriers for higher fuel costs and includes fees such as bunker adjustment fees (BAF) and the fuel adjustment factor (FAF). 

Currency Adjustment Factor: This charge is expressed as a percentage of the base rate and is designed to compensate carriers for currency fluctuations when they are required to purchase goods or services in a foreign currency.  

Cargo Data Declaration Fee: This surcharge is designed to compensate carriers for the cost of declaring cargo information in advance to the European Union authorities.  

Port Dues: This fee levied by the harbor authority applies to ships using the port’s facilities.

Destination Delivery Charge: This charge is determined based on the size of the container and is applied to the base ocean freight rate for many shipments. Destination delivery charge covers sea shipping costs such as crane lifts off the vessel, drayage of the container within the terminal, and gate fees at the terminal operation. 

Detention: Detention fees are a penalty a carrier charges when shippers or consignees do not return the carrier’s equipment (such as containers or chassis) within the allotted free days. 

III. On-Carriage

On-carriage refers to any inland transportation after the container leaves the port or terminal. Here are some of the additional fees companies might expect during this inland portion of the container’s journey:

Container Yard Charge (CYC): A specific handling surcharge applied to a shipping line for receiving a container, storing it on-site at their yard, and then delivering it to either the port or consignee, depending on whether it's a container destined for import or export.

Chassis Usage Fee: A fee imposed for using a special trailer that allows carriers to haul ocean containers. This fee is typically applied to arrange equipment before the vessel arrives at port.

Demurrage: A fee applied to cargo owners when containers are left at the port or rail terminal longer than the allotted free time. 

Destination Delivery Charge: A surcharge that covers costs such as crane lifts off the vessel, drayage of the container within the terminal, and gate fees at the terminal operation. Container size determines the amount of this fee.

Destination Terminal Handling Charges (DTHC): A charge applied to lift and remove a container from a vessel at port.

Fuel Surcharge (FSC): A surcharge applied to compensate carriers for fluctuating fuel costs. (Note: also known as "bunker adjustment fees" and "fuel adjustment factor"). 

Unpacking Service Charge: Third-party warehouses and transloading facilities might impose an additional fee to unload the container at the destination.

Customs Clearance: This is a fee paid to the customs broker to arrange customs clearance for a shipment. This surcharge may include the payment of any Customs Duty, VAT, or other charges related to customs clearance. 

Wharfage: Pier or dock owners assess this surcharge for the loading, unloading, and storing of goods.

Documentation Charges: This charge may apply to compensate carriers for the sea shipping cost associated with preparing import documentation. 

How Port City Logistics Helps Companies Lower Sea Freight Rates 

As average ocean freight rates continue to rise, the various fees and surcharges that come with transporting cargo across the oceans have become even more difficult for shippers and BCOs to bear. The good news is that they can avoid many of the fees covered in this guide with the proper preparation and strategy. 

Experienced transportation service providers help shippers navigate the high seas and circumvent some additional costs that companies incur when shipping containerized freight. As one of the top single-source logistics providers, Port City Logistics offers full-scale operational support. Its services include port drayage, transloading, warehouse storage, and national transportation solutions — all optimized to limit the number of fees and surcharges that our customers incur. To learn more about how partnering with Port City Logistics can help your company lower its sea freight rates, be sure to contact us today!

Topics: sea freight rates