Freight Information: Tips And Advice On Common Freight Charges ship
Freight Information: Tips And Advice On Common Freight Charges
According to Freightos research, there’s an average of over 20 freight fees and surcharges in every international freight quote. But what do all those initials mean anyway?
Do you really understand the freight charges and fees on your freight quote and your forwarder’s invoice? We’ve listed 28 different freight fees and surcharges, by who generally charges the fee, what stage of the shipment it relates to, a short description of what you’re actually paying and tips relating to different surcharges.
Cargo Insurance Description: Typically provided by insurance specialists to protect against damages or theft in transit, shippers usually arrange cargo insurance through their forwarder.
Cargo Insurance Tips: Not really a charge or fee, cargo insurance has been included because it is prudent advice. Carriers and forwarders terms and conditions pretty much protect them from liability if things go wrong. So only the foolhardy should avoid or skimp with this cost.
Booking Fee Description: This is an administration fee from the forwarder at origin.
AKA Documentation Fee at Origin, or House Documentation Fee.
When applied at destination, it is called a Documentation Fee at Destination or Arrival Agent Fee.
Booking Fee Tips: This is a classic fee where forwarders are making their profit. The amount of leeway you have to challenge depends on the amount of volume you bring to the forwarder, or your bargaining power. That leverage may be the potential volume of business that you could bring, or that you forwarder believes that you could bring.
Who Charges the ISF Filing Fee: Forwarder or Customs Broker
Charge At: Early task
ISF Filing Fee Description: Often included as part of the Customs Clearance charge, this cost covers lodging in compliance with CBP’s (US Customs and Border Protection) ’10+2′ advance cargo reporting requirements. It only applies to ocean freight. Forwarders prepare this information from the Commercial Invoice and/or Shipper’s Letter of Intent.
CBP use this information for identifying low risk shipments for potential early release, but as most shipments are released it is effectively identifying high risk shipments to prevent sailing.
Your forwarder also prepares for Customs Entry, required before the ship arrives in port. This reporting includes the same information required for 10+2 reporting, plus additional information. It is prepared from information on thcomparee Ocean manifest (House B/L) and Commercial Invoice.
ISF Filing Fee Tips: CBP may impose a heavy fine on late filing if you do not transmit this information at least 24 hours before the cargo is loaded. Don’t hold back on filing because you don’t have all required information, because you may update right up until the cargo arrives in the US.
CBP may also conduct a more thorough cargo inspection, increasing inspection costs (indirectly, by the privately owned inspection facility). The total cost may run into several hundred dollars even for smaller shipments. Any delivery delay will also incur cost.
You should include a clause with your supply contract that will require the supplier to take responsibility for the cost if they are at fault.
To avoid costly delivery delays, make sure that your forwarder files for Customs Entry before the ship arrives in port, and that the entries on the Commercial Invoice, Ocean Manifest and ISF are identical.
Who Charges the Container Fumigation Fee: Fumigator
Charge At: Origin
Container Fumigation Fee Description: Fumigating or de-fumigating (removing fumigants after treatment) cargo goods, packaging and wood pallets may be required either under the IMO International Maritime Dangerous Goods Code, or US law, as enforced by CBP.
The service may be undertaken before pickup, or on board ship during the port to port leg.
This fee covers haulage from the exporter’s premises to the port/warehouse. It can be struck as a set rate, or also include a fuel surcharge.AKA Transport Arbitrary at Origin, or Inland Haulage.
Container Fumigation Fee Tips: Ensure that you receive written confirmation before paying this charge.
Refer Delivery Fee for a similar fee at destination.
Who Charges Terminal Handling Charges : Terminal Provider
Charge At: Origin/Destination
Terminal Handling Charges Description: This charge is an aggregation of costs associated with the terminal provider’s property, and only applies to ocean freight. The costs covered include access, equipment maintenance, equipment use, and labor (stevedoring). The property covered includes the wharf, the carrier’s terminal facility, or a container freight station (CFS).
Occasionally some components, eg Wharfage, are not aggregated, but charged as a separate fee. Wharfage is a charge on all goods that are loaded, unloaded or transshipped within the Terminal Provider’s property by any means of transportation.
THC is sometimes included with the port to port charge as an all-inclusive rate.
Terminal Handling Charges Tips: A pass through charge and legally not negotiable. but varies per terminal. Forwarders do not apply a margin, so it is an easy charge to check (most carriers usually display it on their home page).
Who Charges the Ocean Freight/Air Freight Charge: Carrier
Charge At: Port to Port leg
Ocean Freight/Air Freight Charge Description: This is the base carrier charge, for the main leg of the shipment – from seaport or airport at the country of origin, to the port at the country of destination.
Ocean Freight AKA Basic Sea Freight, BAS.
Ocean Freight/Air Freight Charge Tips: Port to port shipment is a commoditised product, and often sold at cost. This is why forwarders look to make money on surcharges.
War Risk Surcharge Description: This is a supplementary carrier charge, that is only applied when insurance underwriters designate specific zones as war risks. It covers more than actual wars (invasion, insurrection) including international events that may be escalating toward war, and areas where hijacking (piracy) is prevalent.
The surcharge is levied to recover potential extra costs, such as re-routing or additional security.
War Risk Surcharge Tips: A standard pass through charge and legally not negotiable. This surcharge has been applied relatively recently due to piracy along the horn of Africa.
It is unlikely to be charged on the Asia – North America trade lanes. The closest this surcharge was applied to those lanes was in 2005 around the Malacca Straits (South East Asia), again due to piracy.
Who Charges the Bunker Adjustment Factor Surcharge: Carrier
Charge At: Port to Port leg
Bunker Adjustment Factor Surcharge Description: BAF is based on TEU, to smooth out the effect of oil price fluctuations on carrier costs. It periodically changes, typically monthly or quarterly.
AKA Bunker Surcharge.
Bunker Adjustment Factor Tips: Smaller charges like this can add confusion, so smaller customers usually receive, or should ask for, an all-inclusive port to port charge.
The BAF rate is a non-negotiable pass through charge. The rate is similar between carriers, and until recently, they struck the same rate. It should be easy to check this charge, as most carriers usually display it on their home page.
Who Charges the Currency Adjustment Factor Surcharge: Carrier
Charge At: Port to Port leg
Currency Adjustment Factor Description: Like the BAF, this is surcharge is based on TEU, except CAF accounts for currency fluctuations. Again, its purpose is to stabilize main leg costs in the short term.
Peak Season Surcharge Description: Only applying to imports from Asia, this surcharge covers incremental operational costs incurred during the peak season. Peak season is typically anytime between June 1 and October 31.
Peak Season Surcharge Tips: Carriers already charge higher base rates in the peak season, so this supplemental charge seems unreasonable. But you have little choice but to pay.
Who Charges the Customs Clearance Fee: Forwarder or Customs Broker
Charge At: Origin/Destination
Customs Clearance Fee Description: This charge covers the process to prepare and submit Customs Entry documentation to the CBP.
AKA Customs Brokerage.
Customs Clearance Fee Tips: The standard rate for Customs Clearance is around $50 for clearance with China’s Customs, and $100-$120 for clearance with CBP.
It cannot be anticipated on the freight quote, but CBP may (at their discretion) conduct an examination, accruing costs for you (refer ISF Filing, above).
Examination is almost certain for some products, e.g. food, drugs, animal goods, your documentation is also supplied to other government agencies (OGA) concerned with threats to national health, safety, and security.
Customs Bond Description: The bond protects the US government should an importer not pay any duties, penalties, etc. either while the goods are in CBP custody or after release. It also has a practical advantage of speeding up clearance.
Customs Bond Tips: Even if your forwarder arranges customs clearance, if you ship regularly you should develop your own account relationship with CBP. This is how a customs bond may speed up clearance.
The CBP directive on monetary bonds is posted on their site, and is quite complex. Generally regular shippers should get an annual continuous entry bond, at $550 per year (allow 10 days processing). One-off shipments should get a single entry bond, currently $50.
You must have a bond before you can make the ISF filing.
Customs Duty (Destination) Description: Duty on imports to the US may apply. CBP works off your Customs Entry Summary (Document 7501). This information has come from your Commercial Invoice (type of goods, value), which the Customs Broker then runs through an HS Locator and Duty Calculator.
AKA Customs Tax, Customs Entry Fee.
Customs Duty (Destination) Tips: Whether or not US customs duties apply, all importers will need to pay two additional mandatory fees (refer MPF and HMF, below).
Who Charges the Merchandise Processing Fee: Customs
Charge At: Destination
Merchandise Processing Fee Description: CBP has struck this fee at 0.3464% of your shipment total value, excluding duty, freight and insurance charges. The MPF is capped with a minimum of $25 and a maximum of $485.
Harbor Maintenance Fees Description: The Harbor Maintenance Fee requires those who benefit from maintenance of US ports and harbors to share the cost of the maintenance. It is struck at 0.125% of the value of the commercial cargo shipped through seaports only.
PierPass Fee Description: This is a supplementary terminal handling charge that applies to the ports of Long Beach and Los Angeles for both FCL and LCL.
It is applied for pick ups only during peak hours (weekday normal daytime hours). By encouraging off peak pickups, it eases congestion during peak hours, and covers the additional cost of nighttime operation.
AKA Traffic Mitigation Fee (TMF).
PierPass Fee Tips: A standard pass through charge and legally not negotiable.
Who Charges the Telex Electronic Cargo Release/EDI Fee: Forwarder
Charge At: Destination
Telex Electronic Cargo Release/EDI Fee Description: This charge is applied to cover the cost of sending forms and messages to ports, CBP, and other government and quasi-government agencies, either by telex or electronic data interchange (EDI) mode.
Telex Electronic Cargo Release/EDI Fee Tips: This is a classic fee where forwarders are making their profit. And it is a somewhat dubious charge. In the internet era, why are companies still using telexes? And there is no variable cost in an EDI transfer. Therefore, question your forwarder if charged.
Delivery Fee Description: The load type determines which term the fee for delivery is called. Drayage applies to containers. Trucking Fee applies to ocean freighted pallets. Airfreight Cartage applies to air freighted pallets. This charge covers delivery from a warehouse at the destination terminal to your requested delivery point.
AKA Transport Arbitrary at Destination.
Delivery Fee Tips: If this leg isn’t included in your quote, and you are not picking up the goods yourself, then arrange pickup in advance to avoid costly delays.
Chassis Usage Fee Description: In the US only, truck trailers that carry ocean containers by road were, until recently, often owned by ocean carriers. Forwarders have needed to increase drayage costs to cover additional costs, as carriers withdraw from providing this service.
Chassis Usage Fee Tips: A standard pass through charge and legally not negotiable.