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A Comprehensive Guide to Various Freight Charges | LOTUS Containers

Transporting your good from one location to another across domestic and international boundaries is a bit complicated than one would imagine. Successful shipping requires a good knowledge of the important documents and types of freight charges before the shipment, during the shipment, and post-delivery. The biggest cause of concern is the various freight rates that are imposed on the goods meant to be transported. According to research, it was found that an average of 20 freight charges and surcharges exist that are meant to get cleared to ship internationally. But not all of us are aware of the fact. Do you really know what these initials mean actually?

WHAT IS A FREIGHT CHARGE? The charge imposed by a carrier to deliver cargo from the source location to its final point of destination is called ‘Freight Charge’. Meanwhile, there is a variable cost associated with freight that a consignee has to pay like packing, loading & unloading, documentation, customs clearance, insurance cost, carriage cost, warehousing, etc until the final shipment of the consignment.

Well, given below is the list of 25 different charges but before we jump into it, it is important to know a brief about two charges - Bill of Lading & Freight Bill. Good knowledge of this will help save your time and eliminate confusion.

BILL OF LADING: The Bill Of Lading is a legal document provided by the shipping companies/ 3PL companies that include necessary details about the destination, types, quantity, volume, dimensions of the cargoes being transported. It is served as a shipment receipt as a contract for both shippers and carriers as a document of title stating freight collection destination, delivery location & ETA (Estimated Time Arrival). It must accompany the transported goods, no matter the modes of shipment, and it’s necessary to get it signed by an authorized representative from the carrier, receiver or shipper. It is a prerequisite for the shipping companies and customers as well to check BOL thoroughly and ensure that it is accurate because being a legal document, it can also be used in the jurisdiction to determine company’s obligations, etc.

FREIGHT BILL: Freight Bill is often gets mixed up with BOL, but both are ultimately different terms defining the different meaning that unlike BOL, Freight Bill does not serve as a key piece of evidence in the court of law during a legal dispute. While Freight Bill/ Freight Invoice looks similar to BOL counterparts, it may also include additional charges, stipulations or information that serves to the information clarification of the lading documents. Though they do not seem to be much important during shipping they are retained for long instances to make available at the time of audit it becomes an important source to evaluate and examine records.

List of various freight rates imposed before, between and after transit PRIOR MAIN TRANSIT CARGO INSURANCE: Cargo Insurance avails a customer with compensation against any loss, damage or theft of your consignment during shipment. It usually varies in cost from a minimum of $400 to a maximum of $1,800 for the yearly premium depending upon the cargo policy provided by your freight shipping companies.

CUSTOM BONDS: A custom bond is a legal contract among customs, importer and a surety providing a guarantee to specific obligations. It ensures all the charges and duties associated with defined rules and regulations. As per US Customs regulations, a Custom Bond is a must to import goods to the US. The average cost for a continuous custom when purchased from a broker may cost from $400 to $500 annually.

BOOKING FEE: This is the fee levied by the forwarder at the point of origin for the booking of cargoes. The rates can vary from company to company. It also depends largely on the mode of shipment and types, volume, quantity, of goods to be transported.

ISF FILING: The Importer Security Filing also known as ‘10+2’ gives the CBF a heads up to safeguard high-risk cargoes that documents importing information & details of its route during shipment. It does not imply to bulk cargoes and only affects the imports of Ocean vessels entering the US border.

CONTAINER FUMIGATION FEE: It is the fee charged for the treatment of goods or cargo containers itself to deteriorate the risk of pest or other harmful living organisms to prevent the transfer of exotic organisms. Empty used cargo containers are frequently fumigated to eliminate such danger.

PICKUP FEE: The fee that is charged for the movement of the goods from a factory or warehouse to the point of departure. Factors that determine the rates are the distance to be covered and cargo weight. It can be levied as a set rate or may also include a fuel surcharge.

CUSTOM DUTY: Custom duty is an indirect tax imposed on all the goods to be imported or exported. It depends on the value of the cargo, its dimensions, volume and weight, and many other factors. It varies from country to country depending upon their economic condition and government regulations.

TERMINAL HANDLING CHARGES: Terminal handling Charges or Container Service Charges, applies only to ocean freight is a sum of the cost associated with the containers terminal’s provider property. It is basically an additional cost charged by the shipping companies for handling and managing containers before being loaded.

SECURITY SURCHARGE: Security Surcharge is the charge imposed by port terminals which are assessed to recover capital spent for maintenance and surveillance provided by the port authorities. Under the notice filed with the Federal Maritime Commission, this should be collected from all barges, vessels, cargo interests utilizing services at the port mandated by the Maritime Transportation Security Act of 2002.

CONGESTION CHARGE: This is an additional charge that is levied on the shippers during the high peak season or unusual events such as strikes, port fires, bad weather, etc. This is basically a system of surcharging users to remove their cargoes and make port congestion free.

CONSOLIDATION FEE: Most of the time, multiple shipments from various shippers are combined and packed in one container in order to utilize full space and provide shippers with a cost-efficient method. Hence, to process that, a service fee for collaborating and packing several smaller cargoes in the same container is charged known as consolidation fee.

MAIN TRANSIT WAR RISK SURCHARGE: This is an additional charge applied when the freight has to go through war zones or hijacking areas to recover potential extra costs for re-routing or advanced securities, etc. In response to certain attacks on tankers in few regions, annual war risk surcharge and breach premiums have climbed since then.

BUNKER ADJUSTMENT FACTOR: Bunker Adjustment Factors or Bunker Contribution is a surcharge imposed by ocean carriers to safeguard them when fuel prices are subject to major fluctuations. It specifically accounts for vessel fuel prices and is set three times annually by the TSA (Transpacific Stabilization Agreement).

CURRENCY ADJUSTMENT FACTORS: CAF is applied in a supplement to the freight cost to account for constant fluctuating exchange rates between the US and other countries. The CAF has an inverse relation with the value of the US dollar. It varies according to the destination country.

PEAK SEASON SURCHARGE: During the peak season/ high season when demands are high and supply is less, shippers generally tend to increase the price on the base rate either to earn more profit or due to unavailability of cargoes and ship. It can be applied at any time of the year but comes in motion drastically during the Chinese New Year. So, to transport your freight during high season, you will be incurred to pay the extra sum.

AT DESTINATION- CUSTOM CLEARANCE FEES: It is a kind of tariff or taxes imposed on imported goods because the imported product does not belong to the country and hence shippers have to pay an amount to get their customs cleared. The charges vary from country to country depending upon their policies and trading structure. The standard custom rate of China is $50 and CBP is $100 to $200.

MERCHANDISE PROCESSING FEES: MPF is a fee imposed by the United States CBF for goods that are imported to US boundaries. Many do not even know this in beginning or during the shipment because it is not included in the quote rather it appears on the invoice as a custom charge. The minimum fee of $25 and a maximum fee of $485 can be charged depending on the products.

HARBOR MAINTENANCE FEES: The HMF was created pertaining to the Water Resource Act of 1986 intended to collect money from shippers and whoever benefitted to share the maintenance cost. It imposed by the US and CBF for ocean freight at the rate of 1.25% of the value of commercial cargo. The charge is collected on imported goods, domestic shipments, passengers and Foreign Trade Zones.

PIERPASS CHARGE: This charge was made applicable in the ports of Los Angeles and Long Beach for day and night time containers movement. The main agenda behind imposing this charge is to reduce traffic congestion in the region. It’s a kind of traffic mitigation fee that is charged at the rate of $31.52 per 20’ shipping containers and $63.04 for all other size containers.

ALAMEDA CORRIDOR SURCHARGE: It is a surcharge imposed only to cargoes containing southbound containers moving via Alameda Corridor through rail. This is a standard gate pass charge imply to cover their operating costs and construction debt and hence it is not negotiable.

DEMURRAGE & DETENTION: These are the two charges that are associated with the usage of shipping containers for rent. Amongst the two, demurrage is the charge applied for storage of containers at rail or ship terminals, depot, inland, or yard, etc while detention is the fee that is imposed on a consignee for holding containers with him for more than the allotted time.

EDI OR TAX RELEASE: Charges that are applied to cover the cost of automated technicalcommercial conversations by sending forms and messages, formatting documents to ports, governmental agencies, CBF using EDI (Electronic Data Interchange) or Telex.

DELIVERY FEE: It is the fee to be paid after delivering your goods at the port of destination from a warehouse. The fee is highly determined by the two factors namely- the distance between the warehouse and terminal, and the weight of the cargo.

CHASSIS USAGE FEE: Chassis is a special kind of trailer used for the movement of ocean containers on the road. The chassis usage fee is generally imposed to encourage truckers and shippers to avail their own chassis or undercarriage for the movement of ocean containers. The daily rate ranges from $15 to $25 and it may also vary as per the carrier.

CONTAINER CLEANING FEE: After the shipment, Some products make containers dirty, stained, and have fumigation residual left which makes it unfit for further cargo shipment. If the containers do not meet interior and exterior cleanliness standards, then a fee covering extra cost of water wash, chemical wash, etc is applied to the consignee in the form of Container Cleaning Fee.