There’s no doubt that ocean freight is an essential cog in the wheel that is world trade. And its influence is undeniable — 90% of the merchandise being transported all around the globe is carried out via ocean freight.
But despite the significant role it plays and the countless parties involved in day-to-day dealings with maritime shipping, there is a myriad of shipping-related charges and fees that may confuse even the most seasoned of shippers.
The fees and charges in an international shipping cost are wide-ranging. They cover anywhere from port and custom charges to additional fees implemented only under very specific circumstances. Basic freight charges aside, there’s a whole range of factors to consider when calculating your cost of import or export.
Most fees form part of the overall container shipping rates quoted by freight forwarders and carriers. But there are some that aren’t included and may apply depending on your shipment. In this guide, we’ll go into the details of the different fees that can affect your overall international shipping cost.
To help with your understanding, we have categorized these fees into different sections. However, note that certain fees may fall into multiple sections. Here’s a breakdown of the categories we will be addressing in this guide:
The maritime freight charge is the main cost of your ocean freight shipment.
It covers the expenses generated when transporting freight from the port of origin to the port of destination. Its price varies according to the shipping company and chosen route.
On the one hand, maritime freight costs are very much driven by international trade flows. Which is why freight rates for exports from Europe or America to Asia tend to be much cheaper than import freight rates from Asia.
On the other hand, as in all markets, it’s also driven by competitiveness between providers. This results in a price cycle on certain routes that the industry experiences periodically.
To attract shippers, it’s not uncommon for carriers to lower their prices. This causes a domino effect with other carriers following suit. But once this hits its bottom limit, carriers will naturally have to raise their prices to compensate. This is known as a GRI (General Rate Increase).
A consolidation fee applies only to LCL shipments (low-volume shipments that do not warrant their own container). It is charged by the freight forwarder or consolidator and covers the cost of consolidating various LCL loads from different shippers into one single shipping container.
The basic freight rate aside, shipping lines implement a range of different surcharges to compensate any additional expense derived from certain situations, such as the rise in fuel costs and shortages caused by the high demand during the shipping peak season.
While some of these fees can be avoided with good planning, most are difficult to evade. Nevertheless, it’s important to know where some of the more important ones stem from.
Of all the carrier-related surcharges, the most common ones are the EBS, the BAF, the CAF and the PSS. Here’s a look at each one of them.
The BAF is also commonly known as the bunker surcharge and covers fuel cost.
The BAF applies according to the number of TEUs shipped and is charged by the shipping companies to compensate for fluctuations in fuel prices. This surcharge varies from route to route.
The EBS is similar to the BAF in the sense that it covers rise in fuel prices. The EBS can also vary according to the shipping container type and shipping route.
Under FMC regulations in the US, the EBS is announced 30-days in advance. But in most other parts of the world, it’s applied at the last minute. This is unlike the BAF, which is often announced in advance.
The CAF covers exchange rate risks from one currency to another.
It typically applies when there are significant fluctuations in exchange rates and is charged as a percentage of the ocean freight rate.
Carriers implement PSS during the shipping peak season (between July and October) to cover the increase in operational costs.
This can greatly increase your overall international shipping costs as carriers are already charging higher freight rates during this peak period.
The PSS is limited to and applied during the shipping peak season.
Besides the above-mentioned fees, there are some other lesser-known carrier-related fees that are applicable only under special circumstances such as when shipping over- or odd-sized merchandise, etc.
Here are some of such fees:
For more information on these lesser-known fees, you may refer to our blog post on the 10 lesser-known shipping charges all shippers should know about.
If you think your shipment may be affected by any of these carrier-related surcharges, we recommend you to consult your freight forwarder to get a clearer picture on how they may affect the overall cost of your shipment.
Your overall international shipping cost may also be affected by your chosen trade lane, especially if it passes through specific zones and/or canals where additional charges are imposed.
Besides specific origin and destination port charges, extra fees may apply for the use of waterways such as the Panama Canal and Suez Canal, high-risk zones, etc.
Here is a list of some of the most common zone-specific charges. For more information on how your desired trade lane may be affected by these charges, get in touch with your freight forwarder.
Delay fees are not uncommon even for the most seasoned shippers as some, if not many, can occur beyond your control.
Triggers for delay fees range from congestion at ports, terminals, or yards, customs exams and/or holds, and many other unexpected factors.
Shipping lines and warehouses typically offer free time for the usage of their equipment, including containers. Delay fees will kick in after this free time is exceeded.
Some of the more common delay fees In the ocean freight industry are the demurrage, detention, per diem, warehouse, and storage fees.
Demurrage fees are storage fees charged by shipping lines for container usage while the container is being stored. This typically applies to stored containers at the port. In the event a shipping container sits past its free time inside the port and/or terminal, demurrage will be charged on a per day basis and increases over time.
Detention charges are usually tagged to inland trucking and more specifically when cargo loading or unloading lasts beyond the free time (usually two hours). They are charged at an hourly rate.
The warehouse fee applies to LCL shipments that have been unloaded at a deconsolidation warehouse and are not yet picked up by the consignee. This fee varies according to the volume of the LCL shipment.
Per diem, which means per day in Latin, is applied when equipment (including shipping containers) are not returned to the port/terminal after its allocated amount of free time. Carriers levy this charge to prevent importers from holding on to their containers for too long.
Having to hold your shipment at a location, be it a deconsolidation warehouse, trucking yard, or otherwise will incur storage fees. The storage fee differs from demurrage, detention, and per diem fees in the sense that it applies to the storage of the container instead of over-usage.
For more information on delay fees, you may our post on differences between demurrage, detention, and per diem a read.
Taxes and duties are calculated according to the value of the merchandise being imported into destination.
In most cases, the importer is party responsible for the payment of taxes and duties. However, there are special circumstances in which the exporter is responsible.
Taxes and duties are not charged for the logistics of transporting merchandise but for the entry of goods across a border. The amount due is determined by the customs office according to the HS codes of the destination country and can vary significantly.
It’s not uncommon for taxes and duties to significantly overshadow the freight rate. That said, when planning your shipment, it’s important to consider the financial impact taxes and duties can have on your overall international shipping cost. Speak to your agent at destination to get an accurate figure of how much you’re liable to pay for your merchandise.
Under the CIF Incoterm, duties are charged as a percentage of the value of the goods, which comprises the cost of the goods, maritime freight rate, and insurance. This percentage is determined by the product’s HS code.
For example, if the value of the merchandise is recorded as $100,000 and there’s a 6.5% duty tagged to the corresponding HS code, total duties amount to $6,500.
Certain products may also be subjected to additional duties, such as anti-dumping duties. These apply to imported products a domestic government deems to be priced below fair market rates. Under these circumstances, duties of up to 50% of the product’s value may be applied.
As with any goods or services transaction, merchandise imported into a country are also taxed.
In the EU, this is known as the VAT and rates differ from member to member. EU tax rates are calculated based on the CIF Incoterm and as a percentage of the total customs value of the imported goods: declared merchandise value + insurance costs + shipping costs.
In the US, import taxes are calculated based on the FOB Incoterm and thus only on the customs value of the imported good. Depending on the nature of your import as well as destination, there are other fees that your merchandise may be subjected to, such as:
Customs clearance is the process whereby customs authorities of a country verify that all documentation and goods are in order and determine whether or not they can enter or leave a country.
A customs clearance fee is charged to cover the administrative costs of the necessary procedures and processes. This cost varies according to the country in question but is typically relatively low compared to the amount of duties and taxes due.
However, depending on your circumstances, additional fees may apply. For example, customs may deem it necessary to inspect or conduct an examination on your merchandise.
In such cases, corresponding charges such as inspection charges, transportation charges to the warehouse where your cargo will be inspected as well as warehouse charges will likely apply. The fee also varies according to the different equipment (if required) to inspect or scan your equipment.
For a closer look, you may read our article on the different types of US customs inspections and holds.
Besides examinations and inspection fees, you may incur other customs-related fees such as:
A customs bond works like an insurance for merchandise as it guarantees payment of taxes and duties due. The bond is purchased from a third-party company, known as a surety, which is responsible for paying all required taxes and duties in the event the importer fails to do so.
Customs bonds prices depend on many factors. This includes importing country, type of bond, duration of bond, etc. If you’re importing into the US, we recommend you read our article on US customs bonds.
Other customs-related charges include:
Local port charges vary from destination to destination.. Even in US alone, different states have different terminology and prices for these charges, such as the PierPass in Los Angeles, and the MassPort Usage Fee in Massachusetts.
There are many different port charges that may apply, such as the T3, THC, wharfage fee, security deposit, etc. But the main port charges are T3 and THC.
The T3 is a tax that is charged for the use of port facilities and is applied for both imports and exports.
Terminal handling charges apply to both at origin and destination. It’s charged to FCL shipments to cover the container handling cost at the shipping terminal, including the loading and unloading of the container from the truck, as well as the transportation of the container to and from the vessel.
For certain countries, destination terminal handling charges are payable by the party responsible for the payment of the ocean freight. I.e. If a freight is being shipped under prepaid conditions, destination terminal handling charges must also be prepaid. This is mandatory for some countries like Venezuela and Bangladesh. In this US, this is customary.
Inland charges apply to cargo that is being shipped from door-to-port, door-to-door, or port-to-door. It involves the pick up or delivery of the shipping container from one part of the country to another requiring ground transportation.
These are common charges that may apply even if you’ve taken all precaution to avoid them. Some are due to strict loading/unloading schedules, while others may simply be beyond your control.
Their costs vary depending on the kind of service you require, your loading time, loading location, etc. Here are some of the most common inland charges you’ll encounter.
Also known as drayage, this is a fee that’s charged for the transportation of FCL containers by trucks. The amount is dependent on loading/unloading destination, equipment required, time taken, etc.
A pre-pull fee is charged when an empty container picked up from the port early and stored at a yard in order to meet a specific loading schedule the following day. This is usually the case for cargo that needs to be loaded onto a container on very tight loading times or dates.
Containers cannot be left unattended and need to be stored in a secure facility. A redelivery fee is a charge for having to store a container overnight in a facility in the event due to incomplete loading. The trucker will then re-deliver the container to the loading point the next possible day for loading to be completed.
A chassis redelivery or repositioning fee applies when the truck chassis is located at a different place than the shipping container being loaded or unloaded. In such cases, trucking companies charge a fee to cover the costs of having to pick up or drop off a chassis at a separate terminal.
An ELD (Electronic Logging Device) overnight fee is charged when the trucker transporting your cargo reaches the stipulated limit of driving time before completing the delivery of the container. The driver will need to take his mandatory rest overnight before being able to resume delivery. This is a US-only charge.
This fee is charged by accredited facilities licensed to weigh shipping containers to comply with SOLAS regulations requiring all containers loaded on shipping vessels to have their gross weight declared.
When calculating your international shipping cost, remember to keep destination charges in mind. Also known as local charges, these may be fees that are unavoidable, such as the destination terminal handling charge we addressed earlier, which is both a destination and port charge, or fees that are specific to the destination of your shipment.
Destination fees are usually not considered freight charges as it involves charges on your cargo at the port of destination and not the transportation itself. These charges will vary depending on the carrier and trade route as regulations differ from country to country.
This is the cost of hiring an agent at destination to handle your merchandise as well as all paperwork involved upon arrival at destination. This is usually charged separately from the taxes and duties of your merchandise.
For more information on an agent at destination, you may read our article on how working with an agent at destination helps.
Depending on your cargo’s destination country, you may incur additional charges including but not limited to:
Ocean freight is synonymous with paperwork. Even the most straightforward shipment requires pages of documentation to be filled in and filed. When shipping cargo via ocean freight, it’s important to keep track of not only the documents required for your shipment but also the fees associated with them as they form part of your international shipping cost.
Charges involved with documentation depend on many factors and can vary according to your shipment type, destination, customs requirements, etc. There is usually a charge for the issuance of documents. Make sure to double check the information before the documents are officially issued as additional charges may apply for any necessary corrections.
Here are some documentation fees you may incur for your shipment.
While the cost of issuing the Bill of Lading can be considered negligible, courier services for sending the original Bills of Lading to the consignee can rack up to over $100 for each Bill of Lading.
While some carriers allow for limited changes to be made to the Bill of Lading after the initial issuances, others may charge a correction fee. The cost varies from carrier to carrier.
Remember that the information on your Bill of Lading has to match that on the packing list. Any changes made to the Bill of Lading should be reflected accordingly on the packing list as needed.
In the event that a Switch Bill of Lading is required, a fee will be charged. As with the issuance of the first original set of Bills of Lading, the charge will vary according to the shipping line.
As per SOLAS VGM regulations, from 2016, all containers loaded onto a shipping vessel must have its gross weight declared and submitted to the carrier. As a shipper, you are required to provide this information to your carrier, who will charge you a submission fee.
There are certain countries that may require specific certificates to be produced prior to loading. This is especially so for many African nations such as the CNCA and ECTN for Angola and Cameroon respectively. If shipping to Africa, we recommend you get in touch with your freight forwarder and/or agent at destination so that they can help you facilitate the documents you may need to present to secure your cargo at destination.
The document-related fees mentioned here are just some of the more common ones in this category. Depending on your merchandise as well as destination country, you may be required to submit additional documents and incur additional charges. These include:
It is always recommendable to purchase insurance for your cargo, given the unpredictable nature of ocean freight.
Even though shipping carriers are legally required to provide cargo insurance for shippers, their policies cover just the bare minimum. In the event an unforeseen event occurs, such as the Maersk Honam, shipping lines’ insurance will not cover you and you’ll find yourself in a tricky situation.
The cost of cargo insurance is tagged to the value of your products. It is worth making the extra effort to understand the different types of cargo insurance there are available on the market and choose one that best suits your shipping needs.
For more information on cargo insurance and the different options available, we recommend giving our post on types of cargo insurance a read.
Extra charges may apply to your international shipping cost for reasons ranging from unexpected delays to requiring additional services and/or equipment to safely transport your shipment.
These include charges for services that are optional, such as packing and unpacking, as well as fees that are billed only in the event you need extra time or special permission to load and/or unload. These are a few examples of additional charges you may incur for your shipment:
Pick up & delivery: If not already included in a door-to-door shipment booking, pick up and delivery fees will be required to be paid for separately.
Packing & unpacking: This refers to professional packing and unpacking services to make sure your cargo is well-prepared for its journey in the shipping container.
Container loading: The truck driver is only responsible for transporting your container and is not obliged to assist with loading and unloading. You can, however, pay an extra charge to hire a professional to help with loading and unloading.
Extra container loading time: You are normally given two free hours to load or unload your container. Any extra time taken will be charged by the hour.
Palletizing fee: All LCL shipments need to be palletized. A fee is charged for the process and labor costs.
You may also incur additional fees depending on your shipment’s pick up and delivery locations. Certain charges may also only apply to specific countries. Some of such fees include:
Certain charges may also apply to ensure the equipment (including the shipping container) you are using to ship your cargo have been chemically treated or are properly prepared. One such fee is the wood treatment fee. Any shipment involving wood (this includes pallets) will need to be treated according to ISPM 15 rules. This prevents bugs and pests from being introduced to the country of destination.
If you’re using wood packing material that has not been treated, you will need to do according to the proper wood treatment guidelines — either with heat treatment or methyl bromide fumigation.
Besides the above-mentioned fees that can apply to your international shipping cost, there are other factors that can affect container shipping rates. These include the container shipping dimensions you require, which will depend on the volume of your merchandise.
If you’re shipping a small number of boxes or pallets and are not time-pressed, you can expect to be quoted a lower rate as LCL shipping should suffice for your needs. Larger volumes and sensitive merchandise are probably better suited for FCL shipping as this guarantees you’ll have the entire container to yourself, albeit at a higher price.
We recommend getting an estimate of your international shipping cost before committing yourself to a route, carrier, or freight forwarder.
With iContainers’ ocean freight calculator, you can calculate your international shipping cost while selecting and/or unselecting additional services for your shipment. All you have to do is enter your shipment origin, destination, and whether you’ll be needing a full container or partially-loaded container, and you’ll be presented with a list of available options.
Head on over to our homepage now for a quote. If you require assistance on using our international shipping cost calculator, we recommend you to take a look at our articles:
Should you require more assistance, you may contact us here.