Ocean freight, also known as sea freight, is one of the most cost-effective methods for shipping goods internationally. It involves transporting cargo by sea in large containers, making it ideal for businesses that need to move substantial quantities of products across borders.
In this guide, we’ll explain the charges associated with sea freight forwarding services, the factors that influence costs, and how working with an experienced logistics partner like Apollo Logistics can streamline your shipping process while keeping costs manageable.
What Is Ocean Freight?
Ocean freight refers to the transportation of goods by sea, typically using large containers. It is a popular and cost-effective option for businesses shipping goods internationally, especially in large volumes. This method makes up about 90% of global goods transport and is particularly valuable for international trade.
Singapore’s strategic position as a global shipping hub—with around 200 shipping lines connecting to over 600 ports—makes ocean freight a preferred choice for businesses seeking a balance of cost and efficiency. Despite its advantages, ocean freight can present challenges, especially when handling fragile or perishable goods.
What Are Ocean Freight Charges and Rates
Ocean freight charges refer to the costs incurred when shipping goods by sea. These charges cover the entire process, from loading goods at the port of origin to customs fees and handling at the destination port. Understanding these charges will help you plan your shipping budget and avoid unexpected expenses.
Types of Ocean Freight Charges
Several charges may apply to your shipment, depending on the specifics of your goods, the shipping route, and the services required. Here are some of the most common types:
- Base Freight Rate: This is the standard cost of transporting goods from one port to another, influenced by distance and shipment size.
- Bunker Adjustment Factor (BAF): A surcharge to account for fuel price fluctuations.
- Currency Adjustment Factor (CAF): Compensates for changes in currency exchange rates during international transactions.
- Customs Fees: Costs related to the customs clearance process, including security and brokerage fees.
- Terminal Handling Charges (THC): Fees for loading and unloading containers at both origin and destination ports.
How Ocean Freight Charges Are Calculated
To calculate ocean freight charges, follow these steps:
Step 1: Measure the Size and Weight
Calculate the volume in cubic metres using: Length (cm) x Width (cm) x Height (cm) / 1,000,000. Weigh the shipment in kilograms and convert it to metric tons by dividing by 1,000.
Step 2: Determine the Chargeable Weight
The chargeable weight is based on either the volumetric or actual weight, whichever is greater.
Step 3: Get Current Rates for Shipping Routes
Contact a logistics provider, such as Apollo Logistics, for a quote. Rates can vary based on distance, type of goods, and fuel charges.
Step 4: Calculate the Total Freight Rate
Multiply the chargeable weight by the quoted rate to determine the total cost. Include any applicable surcharges, such as peak season or security fees.
Factors That Affect Shipping Costs
In addition to size and weight, several other factors can significantly influence ocean freight shipping costs:
- Shipping route and distance: The distance between the port of origin and destination plays a major role in determining ocean freight costs. Longer routes naturally require more time, fuel, and resources, driving up the price. You will also have to consider the popularity of the route you have chosen, as well-established have higher demand and more frequent sailing, which allows carriers to offer more competitive rates.
Some routes also have extra charges related to specific local conditions or risks. For example, shipping through areas with a high risk of piracy may come with a surcharge to cover the cost of enhanced security measures. Similarly, you might incur canal transit fees if your route includes a transit through the Suez Canal.
- Type of shipment: Sea freight forwarding services usually offer two primary shipping methods: Full Container Load (FCL) and Less than Container Load (LCL). FCL is best for larger shipments that can fill an entire container, offering exclusive use and cost efficiency for volume. In contrast, LCL is ideal for smaller shipments, allowing businesses to share container space with others, which can save costs but may include additional handling fees and paperwork.
In addition to these, Apollo Logistics offers specialised options like Out-Of-Gauge (OOG) containers for oversized cargo exceeding standard dimensions and dry van shipping containers for safely transporting dry goods.
- Characteristics of goods: Certain items that require special handling or conditions can add to the overall expenses. For example, fragile goods like glassware or electronics may need extra packaging to prevent damage, leading to additional handling fees. Additionally, high-value items may need extra insurance, adding to the overall shipping cost.
Documentation and Compliance
Having the proper paperwork can be said to be the most important part of the process. Accurate documentation ensures that shipments clear customs smoothly, avoiding delays, fines, or even the risk of your goods being held at the port.
Here are some key documents involved in ocean freight:
- Bill of Lading (BOL): A contract between shipper and carrier, acting as a receipt and proof of ownership.
- Letter of Credit (LC): A bank-issued payment guarantee, ensuring the seller receives payment upon fulfilling specified conditions.
- Arrival Notice: Notifies the recipient that the shipment has arrived and is ready for customs clearance.
- Commercial Invoice: This invoice outlines the sale transaction, including the goods, quantities, and price, which is used for customs valuation.
- Packing List: Details the shipment’s contents, including weights and dimensions, for verification by customs.
- Certificate of Origin (CO): This verifies the origin of the goods, which is important for determining duty rates and trade agreements.
Ocean Freight Process and Charges
The process starts with booking the shipment and reserving space on a vessel. The goods are loaded into a container and taken to the port, where Terminal Handling Charges (THC) cover loading costs. Additional fees like Heavy Lift (HEA) charges may apply if your shipment exceeds standard weight limits. After loading, the shipment sets sail for the destination.
Upon arrival, more THC fees apply for unloading, followed by customs clearance, which involves document checks and potential customs duties. After clearing customs, the shipment is delivered to its final destination, which may incur additional inland transportation charges.
Other fees can include congestion surcharges (CON) if the destination port is crowded or special equipment surcharges (SPE) if non-standard containers are needed.
How to Negotiate Better Ocean Freight Rates
Negotiating better ocean freight rates can be challenging due to fluctuating fuel prices and seasonal demand. A practical approach is establishing long-term contracts with a sea freight provider like Apollo Logistics to secure stable rates even in changing market conditions.
Booking shipments in advance can also help you avoid last-minute surcharges. Partnering with a logistics expert, such as Apollo Logistics, allows you to identify cost-saving opportunities and customise your shipping strategy for greater efficiency.
Choose Apollo Logistics To Handle Your Ocean Freight
At Apollo Logistics, we offer client-focused solutions designed to meet the needs of businesses shipping internationally. Our expertise in sea freight forwarding services helps you manage costs while ensuring timely and reliable delivery.
Contact us today to see how our customised approach can benefit your business. Let Apollo Logistics simplify your ocean freight process so you can focus on what matters most—growing your business.