The importance of knowing your ocean freight surcharges
When tendering your transports, what you want to do is move your goods from A to B at the best possible rate and to a satisfactory service level. Simple enough, right?
While in theory, you’re simply buying a transport from A to B – how that transport is charged for can differ wildly.
Ocean carriers are experts at eroding freight in a never-ending rat-race towards the abyss, with a misplaced hope to retake some dollars through a multitude of add-ons and surcharges, some more justified than others. In the end, it might be close to impossible to decipher what the total cost will be, not to mention checking the invoices.
So, to help you understand what you’re asked to pay for, here is a list of some of the most commonly used add-ons and surcharges that you might encounter. But beware – these are examples. There are many other, more obscure ones that can turn up on your freight tender bid sheet and invoice.
- BAF – Bunker Adjustment Factor - to account for fluctuating fuel.
- CAF - Currency Adjustment Factor – to account for fluctuating currency
- ISPS - International Security Port Surcharge - for security of the vessel and container while at the port.
- THC - Terminal Handling Charge - for goods handling at origin/destination.
- BL Fee – for processing the bill of lading.
- Fuel Surcharge – surcharge applicable for fuel used for land transport in connection to pre/on carriage.
- OWS - Overweight Surcharge - for containers overweight containers
- LSS - Low Sulphur Surcharge - for the use of low-emission fuel types
- PSS - Peak Season Surcharge – for peak seasons with extraordinary volumes for carrier.
- Hazardous Surcharge – for hazardous goods.
- EIS - Equipment Imbalance Surcharge – for trades container volumes are not balanced, in terms of import and export.
- ERS - Equipment Repositioning Surcharge – for when there is a need to position empty containers at a certain place for exports.
- Chassis utilization surcharge –for line chassis utilization.
- Piracy Surcharge –for costs applied to certain routes where precautions must be taken to avoid piracy.
- SCS - Suez Canal Surcharge - for costs due to transiting the Suez Canal.
Of course, knowing the terms is just step one. Knowing how to apply the surcharges and how to draw conclusions regarding total cost from them is an entirely different ball game.
And to be sure you get it right, there is nothing like a dedicated, user friendly, freight tendering tool with ready-to-use price templates for all transport modes. The following are a few of the benefits you can expect:
- Control what surcharges are added and how they are applied.
- Check relevancy and impact of surcharges to your specific needs and setup.
- Ensure that all surcharges are correctly applied in analysis and comparisons between suppliers.
- Simplified follow up of invoiced shipments against produced bids.