FCL and LCL shipping. Applicable surcharges.

After a run through of the different types of international freight transport, in this post we will be looking at the main surcharges that apply to FCL and LCL freight.

Basic concepts and surcharges in shipping:

• O/F (Ocean Freight)

  Ocean freight refers to the ‘pure’ cost, prior to any surcharges. It is the transport service, generally from ‘port to port’. For FCL shipping, the cost is usually calculated based on the type of container, whereas for LCL shipping the price is usually expressed in USD/t.

• BAF (Bunker Adjustment Factor)

  The BAF is a surcharge applied to offset fluctuations in fuel prices.

• CAF (Currency Adjustment Factor)

  The CAF is a surcharge applied to cover possible variations in the exchange rate. It is quoted as a percentage of the freight and all of the surcharges that are in a foreign currency.

• Banking charge

  A 1% charge is applied to the freight and all of the surcharges quoted in USD, for both FCL and LCL shipping.

The BAF and the CAF are freight surcharges that change frequently and are specifically associated with a particular consignment, that is, with a port of origin and a destination port. VATOS (Valid At Time Of Shipment) is a related term meaning that whatever the estimate shown on the forwarder’s quote, the BAF and CAF will be charged by the forwarder at the rates in force when the goods are sent, generally the date the goods are loaded on board.

Other shipping surcharges:

• EBS (Emergency Bunker Surcharge)/ BRC (Bunker Recovery Cost)/ BUC (Bunker Contribution)

  The EBS, BRC and BUC are ‘emergency’ surcharges applied by shipping companies to cover extra fuel costs.

• SCT (Suez Canal Transit)

  The SCT is a surcharge applied to goods that are transported via the Suez Canal.

• PCS (Panamá Canal Surcharge)

  The PCS is a surcharge applied to goods that are transported via the Panama Canal.

• Adén (Aden Gulf Surcharge)

  The Aden Gulf Surcharge has arisen as a consequence of pirate attacks on ships crossing the gulf.

• CSF (Carrier Security Fee) / SEC (Security Surcharge)

  The CSF and SEC are security surcharges collected at ports.

Temporary shipping surcharges:

• WRS (War Risk Surcharge)

  The WRS is a surcharge applied to freight when the ship’s route crosses an area that is either in conflict or in which there is a high risk of war being declared.

• WS (Winter Surcharge)

  The WS is a surcharge applied during the winter period to cover the extra costs incurred by ports due to adverse weather conditions.

• Port Congestion

  The port congestion surcharge is applied by shipping companies to cover costs caused by congestion and times of ship inactivity. The surcharge may also be applied where congestion is caused by labour disputes.

• PSS (Peak Season Surcharge)

  The PSS is a surcharge applied by shipping companies during the high season depending on the type of traffic, for example, with imports from China the surcharge tends to be applied from a few weeks before Chinese New Year to a few weeks after it.

• GRI (General Rate Increase)/ GRR (General Rate Restoration)/ ERR (Emergency Rate Restoration)

  GRI (General Rate Increase)/ GRR (General Rate Restoration)/ ERR (Emergency Rate Restoration)

Surcharges related to the characteristics, origin or destination of the goods:

• OWS (Overweight Surcharge)

  The OWS is charged by shipping companies to transport heavy containers. It applies to 20ft containers and each shipping company sets the rate at their own discretion.

• OOG (Out of Gauge)

  The OOG surcharge is applied to cargo that is larger than the dimensions of a container in width and/or height. It is mainly applied to open top or flat rack containers.

• SEP (Special Equipment Surcharge)

  The SEP is incorporated into standard dry container freight rates in order to secure special equipment freight (usually open top and flat rack).

• ICD (Inland Container Depot)

  Also known as dry ports, ICDs are depots for handling and temporarily storing goods. The use of these depots is very common in countries like India, and enables clients located inland, who are far from a port, to conveniently and quickly carry out port operations closer to their own facilities.

• IMO (International Maritime Organization)

  The IMO surcharge is applied to shipments of dangerous goods.

• CDD (Cargo Data Declaration)/ ENS (Entry Summary Declaration)

  The CDD and ENS are surcharges related to submitting a declaration on the details of a shipment, of any type of goods, destined for the European Union.

• AMS (Automated Manifest System)

  The AMS is a control and prior authorisation system for goods destined for the United States or for transhipment there. The AMS surcharge applies to the electronic submission of the declaration to the American authorities. Without prior authorisation, the goods cannot be shipped.

In the vast majority of FCL cases, the surcharges mentioned above are applied per container or per TEU.

In the vast majority of LCL cases both the freight and the surcharges are applied per t/m3, or per W/M or W/V which, as we explained in the post about calculating chargeable weight, are essentially the same thing.

The surcharges for submitting declarations (CDD / ENS / AMS) are applied per B/L for both FCL and LCL freight.

It is currently common for both shipping companies and forwarders to offer ‘all-in’ freight rates, that is, a fixed price per container or t/m3 (depending on whether it is FCL or LCL) which includes the freight and main surcharges.

By Blanca Romeu

• Post I:  Shipping quote. How to understand and get the best quotation.
• Post II: FCL and LCL shipping. Applicable surcharges.
• Post III: Shipping rates. Local costs.
• Post IV: Air freight quotation: how to understand.