How Sea Freight Rates are Calculated
LCL Sea Freight Rates
Compared to air freight, the way sea freight rates are calculated is very simple. For LCL sea freight the agent will commit to a regular service to a port, on more popular routes the sailings will be weekly, for less popular they may be every 2 weeks or even every month. They will usually use 40ft containers or preferably 40ft high cube containers, 20ft containers will used if there are restrictions on the destination port. As the containers can take a maximum weight and a fixed volume it is easy for the agent to calculate their costs per 1000Kgs or 1m3. They will then have a breakeven figure to make the container profitable, so they will know how many cubic metres they need to be able to make a profit. The best savings can often be made near the close off date for the container, as the agent will know, if they need more cargo to hit their breakeven point or if this has already been reached, they know that any extra cargo is all profit, either way the shipper is now in a strong position for negotiating lower LCL sea freight rates.
FCL Sea Freight Rates
The agent has less flexibility when offering FCL sea freight rates, as the shipping lines will have set charges for any of their routes. Savings can be made by signing contracts with shipping lines and making a commitment to book a minimum number of containers per year. The contracts can reduce the FCL sea freight rates quite substantially and discounted rates will be offered to make sure the targets are hit.
The shipping lines have different container surcharges, some they charge almost all of the time and some are introduced at busier times. The main container surcharges are BAF – Bunker Surcharge and CAF – Currency Surcharge, these surcharges are usually set for a period of 1 month and are charged most of the time. The other main surcharge is a Peak Season Surcharge and the reason for this is supply and demand, the shipping lines know they can fill the vessels, so they charge a premium if you want to move a container.
Additional Sea Freight Charges
There are other charges that will make up a sea freight quotation they are the Bill of Lading Fee, the UK Customs Entry, Terminal Handling, UK Haulage and Fuel Surcharge.