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  • Writer's pictureNew Horizon Freight Solutions

The Hidden Costs of Sea Freight: What You Need To Know Before You Ship

Extra charges for international shipping can be added without clear communication to the sender or receiver. Imports/exporters may be unpleasantly surprised by these costs, and customs may withhold cargo until payment is made.  


Businesses must understand the costs of sea freight to effectively manage their logistics expenses, reduce risks, and optimize their supply chain. In this article we provide a comprehensive outline of the costs involved in sea freight shipping.



Costs of sea freight


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Container Costs: Unpacked the Fees in Containerized Cargo


There are a few sea freight shipping costs in containerized cargo that many aren't aware of. Many of these fees can vary according to different factors such as duration of use, type of container and size of the container.  


These fees can include handling charges, storage fees, maintenance fees, cleaning fees, positioning fees and of course the rental fee.


Let's break each of these down into more detail:


Container handling charges are fees for handling containers during shipping. These fees cover tasks like moving, storing, and managing containers. The charges are related to the handling of containers throughout the shipping process. These fees can vary depending on the port and the shipping line used.


Container storage fees are charges for storing containers at ports or container yards. These fees can be charged daily or weekly, and the amount may vary based on the location and duration of storage.


Container maintenance fees are charges for the maintenance and repair of shipping containers. These fees can be charged by shipping lines and can vary based on the age and condition of the container.


Rental Fees: This is the core cost associated with using a container. These are usuallycharged per day, week, or month, depending on your agreement with the container provider.


Cleaning Fees: Containers need to be cleaned to meet international phytosanitary regulations. This fee covers the cost of professional cleaning for the container. The cleaning ensures that the container is free of dirt and germs. The cleaning is done both before and after you use the container.


Positioning Fees: These fees cover the cost of moving the container from its current location to the desired pick-up or drop-off point. This can include inland transportation charges if the container needs to travel between a depot and the port.


Some shipping lines may ask for a security deposit in addition to the rental fee. This refundable deposit serves as a guarantee against potential issues like delays (demurrage charges), damages to the container, or even its loss. Think of it as a temporary holding fee that is returned upon the safe and timely return of the container.




Man doing container clearance


Container Clearance Charges


Container customs clearance costs are separate from the fees associated with the container itself. They are freight charges related to getting your goods through customs at the destination port. 


Some cost you may come across when clearing your containers include:


Customs Duties: These are taxes imposed by the government on imported goods. The rate can vary significantly depending on the type of goods and the country of import.


Customs Brokerage Fees: Many importers choose to hire customs brokers to navigate the clearance process. Their expertise ensures smooth passage through customs and minimizes delays.


Inspection Fees: Customs authorities may require inspections of your goods, and these inspections can incur additional fees.



Documentation Processing Fees Breakdown


Beyond the processing fees, container clearance necessitates a variety of documents. The core ones include a commercial invoice detailing the goods and their value, a packing list with itemized contents, and a bill of lading (ocean) acting as a contract and receipt. 


An import/export declaration and certificate of origin (depending on trade agreements) are also crucial. Various goods need different types of documents. For plants, a phytosanitary certificate may be necessary.


Animal products might require a sanitary certificate. Hazardous materials may need a dangerous goods declaration. Certain goods may also need specific permits or licenses. 


Ensuring all this documentation is prepared accurately is essential for a seamless container clearance process. Consider working with freight forwarders or customs brokers for guidance on how to complete all these documents.




Containers being stored in the port and incurring demurrage costs


Free Time, Demurrage & Detention Fees Explained


Free time in containerized shipping refers to the period of time that a carrier allows its customers to use a container for loading and unloading cargo without incurring additional charges. 


This time frame is usually written in the contract between the carrier and the customer. It gives the customer enough time to finish handling their cargo without having to pay extra fees.


Demurrage fees are charges incurred when a container is held at the port or terminal beyond the agreed-upon free time for pick-up or drop-off. Demurrage fees kick in when a container lingers too long at the port terminal.


These fees are charged to prevent importers from storing containers in the port for too long. This helps ensure that the port runs smoothly and efficiently.


Detention fees are charges incurred when a container is held at a customer's facility beyond the agreed-upon free time for loading or unloading cargo. The port or terminal will charge fees if the empty container is returned late after being used for transporting cargo.


These fees are typically imposed for late returns of empty containers to the port or terminal. The charges are applied when the container is not returned on time after being used to transport cargo. 

If you hold onto the container beyond the free time allowed by the shipping line (t you'll be charged a detention fee. It essentially compensates the shipping line for the lost opportunity to use the container for another shipment.



Surcharges: The BAF and PSS Surcharges


The Bunker Adjustment Factor (BAF) is a surcharge applied to shipping costs that reflects the fluctuation in fuel prices. It is typically calculated based on the cost of bunker fuel, which is the fuel used by ships for propulsion. 


The BAF is usually expressed as a percentage of the base freight rate and can vary depending on the shipping route, the fuel price at the time of shipment, and the specific terms of the contract between the shipper and the carrier.


The BAF is intended to help carriers recover the costs of fuel, which can be a significant expense in the shipping industry. It is also used to incentivize carriers to use more fuel-efficient vessels and to encourage shippers to reduce their carbon footprint. The BAF is typically reviewed and adjusted periodically to reflect changes in fuel prices.


The Peak Season Surcharge (PSS) is a surcharge assessed by steamship lines as part of ocean freight during peak shipping seasons. It is typically applied to cover the increased costs of shipping during these periods, which can include higher fuel costs, increased demand for shipping services, and other factors.




Ship in port under gantry crane


Port & Terminal Fees


Port dues are charges levied by port authorities for the use of port facilities and services. These fees are typically imposed on vessels entering or using the port and are intended to cover the costs associated with maintaining and operating the port infrastructure, including dredging, maintenance of navigational channels, security, and other services provided to ships. 


Terminal Handle Charges (THC): Terminal handling charges are fees levied for handling cargo at the terminal. These charges cover services such as loading and unloading cargo, storage, and other terminal-related activities.  


These charges are typically incurred by shippers or consignees for the services provided by the terminal operator in managing the movement and storage of cargo within the terminal premises.



Other potential sea freight costs that could arise


1. Currency Adjustment Factor (CAF): This surcharge reflects fluctuations in exchange rates between the currency used for the base freight rate and the currency used for port charges or other expenses.


2. Documentation Discrepancy Fees: Inaccurate or incomplete documentation can lead to delays and penalties imposed by customs authorities. Working with a freight forwarder can help ensure proper documentation to avoid these fees.


3. Phytosanitary Inspection Fees: Certain agricultural products might require inspections by plant health authorities, leading to additional fees.


4. Special Handling Charges: Oversized, overweight, or hazardous cargo might require special handling equipment or procedures, resulting in additional fees.


5. Inland Transportation Permits: Permits might be required for trucks transporting containers on certain routes, adding to the overall cost.


6. Warehouse Storage Fees: If unforeseen circumstances lead to a need for extended cargo storage at the origin or destination port, storage fees will accrue.



Conclusion

It is important for shippers and consignees to carefully review their contracts and bills of lading to ensure that they understand all the hidden costs involved in sea freight shipping. Working with a reputable freight forwarder or logistics provider can also help to minimize these costs and ensure that the shipping process runs smoothly.


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