What is Ocean Freight (O/F)? Types of Sea Freight Surcharges

1. What is Ocean Freight?

What is ocean freight? Ocean freight (O/F), also known as sea freight forwarder, is the term used to refer to all types of sea freight surcharges. This is also a fee included in ocean freight rates in the union's or shipping company's tariff. Thus, ocean freight can be understood in the following two ways:

• Meaning related to cost (Ocean Freight Charge): O/F is understood as the fee that shipping lines must collect when customers book transportation services. In addition, this fee is shown on the quote that the company sends to customers.
• Meaning related to sea transport: O/F is a method of transporting goods by sea, to distinguish it from other methods such as air transport (air freight). In addition, O/F is also an important part of cross-border trade. This allows the transport of goods in large quantities between countries. These goods are often transported by ship.

2. Who will pay Ocean Freight?

After learning about what ocean freightis, the issue you need to care about is who will pay Ocean Freight. However, depending on the delivery conditions between buyer and seller, the shipping company will collect freight. If the contract does not add additional agreements, the person paying Ocean Freight will have two cases:

• Consignee pays freight: This case applies to delivery terms F (FCA, FOB, FAS) and E (EXW).
• Shipper pays freight: Applies to delivery conditions for types C (CPT, CIP, CFR) and D (CIF, DDP, DAT).

In addition, reality may change based on the needs of both buyers and sellers. For example, in a contract with FOB conditions, both parties have agreed that the seller will pay the sea freight on behalf of the buyer. Thus, sea freight at the loading port is paid in advance instead of at the unloading port.

3. Common Ocean Freight surcharges

In addition to ocean freight surcharges, businesses also have to bear additional Ocean Freight surcharges such as:

3.1 Surcharge on imported goods

• THC Fee - Terminal Handling Charge: This is a port handling fee collected per container, intended to offset fees for some port activities. The port will collect this fee from shipping lines and other fees. After that, the shipping company will collect the surcharge from the shipper. The shipper here can be understood as the sender or recipient.
• D/O fee - Delivery Order fee: This is the fee used to issue delivery orders. When there is a shipment imported into Vietnam, the consignee goes to the shipping company to get the delivery order. Then, bring it to the port of presentation to pick up the goods.
• CFS fee - Container Freight Station fee: When there is an import-export retail shipment, the company will unload the goods from the container to put into the warehouse (or vice versa) and collect the CFS fee.
• CIC Fee - Container Imbalance Charge: This is a surcharge for transporting empty containers. This is the type of freight that shipping companies charge to offset costs incurred during transportation.
• CFF - Cleaning Container Fee: Container cleaning fee. This is the fee that the importer needs to pay to the shipping company to clean the container after using it to transport goods.

>>>> CLICK FOR MORE INFO: Latest process of exporting goods by sea

3.2 Surcharge on exported goods

• THC Fee - Terminal Handling Charge: Surcharge for loading and unloading goods at the export port. This amount is collected per container to compensate for port activities such as container gathering, loading and unloading,...
• AMS fee - Advanced Manifest System fee: This surcharge is due to the customs of Canada, the US and other countries requiring information declaration before goods are loaded onto the ship for transport.
• B/L fee - Bill of Lading fee: This is the B/L issuance fee. Similar to D/O freight, but when a shipment is shipped, the shipping company needs to issue a B/L
• CFS fee - Container Freight Station fee: Fee applied exclusively to LCL retail cargo. When there is a retail shipment of goods exported or imported, the Forwarders unload the goods from the container to put them in the warehouse and collect the CFS fee.
• EBS fee - Emergency Bunker Surcharge: Fuel surcharge for shipments to Europe. This fee compensates for losses due to fluctuations in gasoline prices.
• ENS - Entry Summary Declaration: Manifest declaration fee at the port of arrival for shipments to Europe. This is an additional fee for declaring imported goods into Europe to help ensure security in the region.
• AFR - Advance Filing Rules: Electronic Manifest filing fee for shipments imported into Japan.
• Seal fee is the fee paid to shipping lines when purchasing container seals.

>>>> SEE MORE: The most complete process of importing goods by sea

3.3 Other surcharges

• PCS - Port Congestion Surcharge: Port congestion charge. This surcharge is applied when there is congestion at the loading port and causes the ship to be delayed.
• PSS - Peak Season Surcharge: Peak season fee. This fee is used by shipping lines during the peak season when transportation demand increases sharply.
• SCS - Suez Canal Surcharge: A fee applied when goods are transported through the Suez Canal.
• BAF - Bunker Adjustment Factor: Compensation fee when incurred due to fluctuations in fuel prices.
• CAF - Currency Adjustment Factor: The fee that shipping lines collect from shippers to supplement fees incurred due to foreign exchange rate fluctuations.
• LSS - Low Sulfur Surcharge: Fee for reducing sulfur emissions. This fee is used in import and export transportation on some sea shipping routes.
• COD - Change of Destination: Fee to compensate for costs incurred when the goods owner wants to change the destination port such as road transport, loading and unloading fees,...
• DDC - Destination Delivery Charge: Fee to compensate for the costs of unloading goods from the ship, loading containers into the port along with port entry fees.
• ISF - Import Security Kiling: Security declaration fee for imported goods in the US. In addition, this fee also applies in addition to the security declaration for importers.
• GRI - General Rate Increase: Freight fee (occurs during peak season).

4. Advantages and disadvantages of Ocean Freight

What is Ocean Freight and what are its advantages and disadvantages? The information below will help you better understand the advantages and disadvantages of Ocean Freight:

4.1 Advantage

urrently, sea transportation is favored by many businesses because of the following advantages:

• Can transport shipments of large volume and size.
• The level of safety is high because there are few collisions between cargo ships.
• The price is lower than some other shipping methods.
• Contribute to the development of the international trade market by sea.
• Not limited by transportation support tools and the number of vehicles.

4.2 Defect

Although Ocean Freight has many outstanding advantages, it still has some disadvantages:

• Sea transport also depends on weather conditions and natural factors.
• Using this method, it is not possible to deliver to your door, so it needs to be combined with some other shipping methods.
• Transporting by ship will take a long time, so it is not suitable for goods that need to be transported quickly.
• The ship's speed is still quite slow because the ship's resistance in the water is greater than the air resistance that other vehicles do not have to endure.

5. What items are shipped via Ocean Freight?

What is sea freight? What items are transported through O/F? Besides the items that face many obstacles in transport by other methods, it will be easier for Ocean Freight. Therefore, Ocean Freight is suitable for many different items, such as:

• Goods easily affected by the environment: cigarettes, tea, spices, etc.
• Goods with physical and chemical properties: goods that are dangerous to humans and easily absorb moisture, such as solutions, toxic chemicals, gasoline, powders,...
• Goods that do not affect other shipments: goods with large volume and high value, such as machinery, jewelry, industrial equipment, raw materials,...
• Low-value goods include clothing, household appliances, shoes,...
• Bulk cargo: This is a type of cargo that does not have a fixed shape, such as coal, ore,...
• Liquid goods: liquid goods include chemicals, petroleum, liquid foods,...

In addition, Ocean Freight also classifies goods according to the following modes of transportation:

• Transport by container for general goods
• Transported by means of transport capable of keeping specific items frozen.
• Transportation by barge for minerals, rocks, sand, etc.

6. How to calculate Ocean Freight charges

O/F charges are usually calculated based on the following criteria:

• Commercial routes: For specific routes, there will be different fees.
• The type of goods also affects the freight price.
• Depending on the distance traveled, fares will vary.
• Container size
• Shipment weight or volume: For some shipping lines, freight will be calculated based on weight or cubic volume.

Normally, large shipments will be calculated according to the following formula:

O/F = (length x width x height) x SL

7. Factors affecting Ocean Freight rates

What is ocean freight, and what factors affect O/F freight? Below are some factors that determine Ocean Freight charges:

• Balancing supply and demand: Fares may change depending on the supply and demand profile of specific routes.
• Demand fluctuations based on season: For some routes, there is increased demand for transporting goods during a specific season, which will lead to increased freight rates.
• Fluctuations in foreign exchange rates also change freight rates.
• Fluctuating fuel prices also affect shipping lines' fees and freight rates.

8. Ocean Freight follows each main route

Ocean freight rates vary depending on the transport route, season and type of goods. The following is a table of sea fares for each main route for your reference:

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9. What are the forms of chartering ships using the Ocean Freight method?

What are the forms of chartering ships by Ocean Freight? In the maritime sector, there are usually two common forms of ship chartering:

9.1 For the form of chartering a market boat

• Concept: Chartering a ship is a form of direct shipper/intermediary renting part of the ship to transport goods from one place to another.
• Characteristic:
  • The structure of market ships is somewhat more complicated than that of other types of ships.
  • Market ships often carry small quantities of general goods.
  • Conditions for transporting goods are specified by the shipping company and printed on the ocean bill of lading issued to the business.

• Steps to hire a boat:
  • Step 1: The goods owner uses an intermediary to find a shipping company for his shipment.
  • Step 2: The broker will send the freight record.
    • Postage notes are often pre-printed as templates and contain the necessary information to fill in when used.
    • Cargo owners can store freight for a quarter or a whole year, according to the contract signed with the shipping company.
  • Step 3: The broker and the shipowner agree on some important conditions when loading, unloading, and transporting goods.
  • Step 4: The broker will notify the shipper of the freight storage results.
  • Step 5: The goods owner receives the ship schedule to transport the goods to the port for delivery to the ship owner.
  • Step 6: After loading the goods onto the ship, the ship owner's representative issues a stamped bill of lading to the goods owner.

9.2 For the form of chartering ships by trip

• Concept: Chartering a ship by trip is a form of ship traveling on a route to importing countries. However, depending on the charterer or transport route, there is no specific route, including schedule and port entry.
• Characteristics: Here are some features that charter ships bring:
  • Objects of transport: for large-volume shipments that fill the ship and leave only a few empty seats. Most of them have different characteristics compared to regular products. In addition, goods transported on ships are classified by object depending on the purpose of the ship owner.
  • Ship structure: a ship with only one deck, a frame, and a large hatch. This compartment has a special structure for convenience when transporting, loading, and unloading goods.
  • Freight: Depending on the terms in the charter contract, the parties will mention the charter fee, including insurance and loading and unloading. In addition, when hiring a private ship, the fee will be higher than that of a market ship if the goods have the same conditions, such as quantity, volume,...
  • Scope of operations: Depending on demand, the market will be divided into the form of chartering ships by trip.

• Types of rental:
  • Renting one trip at a time: For this form, both parties need to sign a contract, and based on each trip, there will be a different contract. This type applies when the charterer makes a few trips or signs with different ship owners.
  • Renting multiple consecutive trips: The lessee needs to transport many import-export shipments, many consecutive trips, and depending on the contract agreement, within a certain period of time or number of trips.
  • Round-trip rental: In this form, both parties will sign for both the return trip and the return trip. The charterer uses a ship to transport goods from the port of loading to the port of destination, then transports the goods from the port of destination to the port of loading. This type applies to cases of exchanging import and export goods, or buyers who both export and import goods between different countries.
  • Charter: This is a form where the charterer will cover the entire cargo ship with the Ocean Freight method. This type is applied when the shipper needs to transport a lot of goods or does not want others to hire others on the same train.
• Steps to rent a boat:
  • Step 1: The charterer will contact a third party to rent the ship.
    • In this step, the renter needs to provide information about the goods, such as packaging, product name, quantity, etc., so that the broker can find a suitable train.
  • Step 2: The third party needs to find a suitable ship owner.
    • Based on the information about the goods provided by the charterer, the broker will find and offer charter ships to suit the cargo transport requirements.
  • Step 3: The third party will negotiate with the shipowner on behalf of the charterer.
    • After choosing a suitable ship owner, the broker and ship owner agree to negotiate terms of the charter contract, such as freight, shipping conditions, loading and unloading fees,...
  • Step 4: The broker will notify the charterer of the results and negotiate with the charterer so that the charterer can prepare to sign the charter contract.
  • Step 5: The taxman will sign a contract with the ship owner.
    • Before signing, the tenant needs to review the terms of the contract. After that, the two parties will correct and supplement a number of agreed-upon articles accordingly.
  • Step 6: Execute the contract.
    • Once signed, the charter contract will be implemented, and the charterer needs to transport the goods to the port for loading onto the ship. When the goods are loaded onto the ship, the shipowner will issue a bill of lading to the charterer.

>>>> CONTINUE: Classification of common types of ships in sea transport

10. What to note when shipping by Ocean Freight method?

When shipping by O/F method, you need to pay attention to the following things:

• Avoid shipping items that are fragile or dangerous to the shipping unit, as additional costs may arise during delivery.
• For large and bulky goods, transportation costs will be high.
• To ensure the safety of shipments and avoid unfortunate incidents, shippers will often choose cargo insurance services.
• When shippers want to use insurance packages for loading, unloading, and packaging, they need to discuss carefully with the shipping unit. Besides, you can negotiate with the unit to offer preferential prices.
• You should choose the right type of container for the shipment to avoid damage during transportation.
• If you want to ensure your goods are always in a safe condition, avoid unwanted incidents. Normally, shippers will choose insurance services for their goods. However, for some necessary cases, this package is not needed.

11. Benefits of using Forwarder's services

Using Forwarder services will help businesses save costs. Because Forwarders will find good transportation methods, routes and shipping companies that suit the needs of the business. At the same time, the Forwarder also arranges many small batches of goods to be packaged and transported to the destination. Thanks to that, costs for each shipper are reduced.

If you are in need of using forwarder services, you can consider choosing Dolphin Sea Air. The unit is proud to provide marine transportation services at competitive prices, safely, effectively, and quickly.

Hopefully, the above information will help businesses better understand what ocean freight is and how to calculate freight. If you have any questions, you can contact Dolphin Sea Air for answers.

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