A Beginner’s Guide to Ocean Freight

Ocean-Freight-2

By Cate Hull

Shipping freight by ocean container remains the most economical way to ship when compared to air freight, especially when the cargo weighs more than 200 kilograms.

For shippers, understanding the various shipping sizes and purposes will ensure safe transportation and yield cost effective options.

When evaluating the options for your shipment, keep these points in mind:

● Containers are typically made of steel, with corrugated sides. Container bottoms usually consist of plywood or treated wood planks, unless stated otherwise.
● When shipping goods that are concentrated or heavier than normal, confirm that the bottom of the container can support the weight without breaking.
● Sizes of containers are listed in feet.
● A container’s internal and door dimensions are generally standard, but at times vary by carrier. Confirm specific measurements during initial discussions with your carrier or freight forwarder.
● Depending on the carrier, maximum payloads per container can vary. Be sure to confirm the maximum weight before shipping.
● Before shipping, you’ll also need to confirm the weight of the containers are legal for ground and rail transportation.

The best type and size of container will vary from shipment to shipment and depend on the characteristics of the cargo.

Temperature-controlled containers

There are refrigerated containers, or “reefers” for shipments of perishables. These containers are thermal, insulated units with compressors to heat or cool the cargo. Some reefer containers even have adjustable ventilation, allowing for internal airflow. Designed to transport temperature-sensitive cargo and perishable goods like produce, reefer containers are the best option when transporting items that need to be transported at a constant temperature that’s above, or below, freezing.

If your cargo is unique and you are unsure if a specialized container is required, contact your freight forwarder to help you identify the optimal container. (Source: Ascent Global Logistics).

Types and Sizes of Containers

Sea freight comes into two varieties: Full Container Load (FCL, 20’ and 40’ containers) and Less than Container Load (LCL). Further, containers come in three basic sizes: 20′, 40′, and 40′ high cube). However, costs for shipping ocean freight fluctuate depending on whether you are shipping full container load (FCL) or less than container load (LCL). Below are some ballpark numbers.

Costs associated with Container Freight
(Costs mentioned here are for illustration purposes. )
Ocean freight has high base costs, but it scales very well. For example, your cost to ship a 20 kgs box via ocean freight may be $300, but for 200 kgs you will pay $310, for 2000 kgs, $390, etc. For air freight, there is almost no scaling. A 20 kgs box will cost you $100 and a 40 kgs box will cost you $200.

Full containers cost anywhere from $2000-$4000 for a 20’ container to North America from Asia (containers are always cheaper to the West Coast) and LCL is pretty close to fractionally equivalent of how much of the container you’re using (if you’re taking up 25 percent of the 40’ container, you’ll pay around 25 percent the cost of a 40’ container). LCL freight simply means you have one or more pallets put into a container along with other companies’ goods. Full containers mean you get the full container to yourself.

Sea freight can be delivered to most major ports. Sydney, Melbourne, Singapore, Shanghai, Rotterdam, Ningbo-Zhousan, and Hong Kong are some of the busiest ports in the world.

Landlocked areas require the container to move by rail. Although prices are slightly more expensive for inland delivery, they are still extremely reasonable.

Choosing between LCL and FCL

When should you use LCL ocean freight and when should you use FCL ocean freight?

The obvious answer would appear to be that you should ship full containers when you have enough product to fill the container and LCL, otherwise. This isn’t quite true.

From a financial perspective, a full container 75 percent or greater full is normally cheaper than shipping LCL (in other words, LCL has around a 25 percent prorated surcharge). However, there are two other important considerations. First, LCL has transit times around 1-2 weeks longer than FCL. That’s because the freight forwarder must pack your items and unpack your items with other freight. Second, LCL cargo is more prone to loss and damage (although it’s very rare) because of this additional handling. If time and care are important for you, shipping even a half empty container can sometimes make sense.

Fees, Duties and Taxes

Then there are the fees. With ocean freight, there are a lot of surprise fees when the shipment comes to your country. When you receive an invoice from your freight forwarder you may be shocked at how many fees exist outside of the actual ocean freight. Below are some sample fees you can be expected to pay:

Dock Fees: $50-100
Freight Forwarder Administration Fee: $75-200
Security Fee: $50-100 (normally on Full Container Loads)
Customs Clearance Fee: $100-200 (plus applicable duties/taxes)
Final Truck Transportation from the bonded warehouse to your doorstep: $200+ (unless you pick up your shipment yourself)

These are just the fees once your shipment arrives in your home country. They do not include the fees from the shipping country, which can vary significantly depending on what your incoterms are or the actual cost of the sea freight itself. (Source: ecomcrew.com)

When goods are not shipped domestically (within your country) or within a single customs union, such as the European Union, you are liable to pay any inbound duties and taxes which your local customs authority deems appropriate.

What is payable, if anything, depends on where the goods are sent from, the type of goods, their transactional value and the weight of the shipment.

As in many business endeavors, the devil is in the details. Knowing what container to use, what method of shipping is best, and what fees await you will keep the shipping process as efficient and cost-effective as possible.

Cate Hull is the CEO of FreightExchange, a freight and logistics company based in Sydney.