Thursday, August 27, 2009

Ocean Freight Rates Are On The Rise! Have You Renegotiated Your Rates Lately?

Ocean freight rates are on the rise. This is particularly true of ocean container shipments. In the last three months average ocean freight rates (container transport particularly) have climbed up to 55%. Have you renegotiated your rates lately? If not, now is the time!

Effectively negotiating ocean freight is not so simple and depends on knowing a fair amount of detail. Will you have many “one-time” shipments, or more a repetitive business with each shipper? How much product are you shipping at one time, or if repetitive, each shipment? If repetitive, how often? The answers to these questions also determine if you want to use a freight forwarder or negotiate directly with the ocean carriers.

Door to door transit time is also a huge consideration. Will you ship to a major or “gateway” port and then truck to multiple distribution centers? Or will it all go to one DC? If you are planning on moving the containers intact to an inland DC, some difficulty may arise depending on the ocean carrier, and rail charges can be quite high.

There are quite a few charges that may be a part of the total ocean / delivery transport costs on a typical import shipment. Some may be negotiable with the carrier / forwarder (given sufficient volume and frequency) and if you understand how ocean freight rates are calculated.

Some of the most common ocean freight cost components are:

BAF - Bunker Adjustment Factor Surcharge
CAF - Currency Adjustment Factor
PSS - Peak Season Surcharge

… and 10 to 15 more depending on your actual contract and shipments.

Depending on your terms of sale (Incoterms) you may pay origin charges including:

ORC - Origin Receiving Charge
ODF - Origin Documentation Fees
THC - Terminal Handling Charges

If your shipment is moving inland from the port you may pay:

DDC - Destination Delivery Charges
IPI - Inland Point Intermodal or MLB - MiniLandBridge
IFC - Inland Fuel Surcharge

In addition, your container freight rate may depend on the actual commodity being shipped.

Of course for your full “landed cost” there are the myriad of other costs not directly associated with the ocean freight or container rate, some of which include:

Importer security Filing (ISF or 10+2)
Customs Brokerage
Duty & Taxes
Stripping and / or Transloading of Containers
Interim warehousing

and, and, and …

If you need more detail or clarification, we will be happy to work with you to setup a bid or RFP (Request For Proposal), or to audit or review your current rates and processes for possible improvement.

Whatever you do, plan for success! Poor planning can result in much headache and unnecessary expense. Great success will follow your good planning.

Contact us today at for more information.

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