How is the quotation determined in maritime transport?

Tense situations around the world constantly influence quotations in maritime transport. Between Asia and Europe, they fell slightly at the start of the summer. The new tension in relations between China and the USA made shippers fear that they would rebound. The geopolitical context, however, was not enough to offset the effects of falling demand.

To understand how rates are set in maritime transport, we will first get to grips with all the concepts we need.

What is a quotation?

A sea freight quotation is much more than a price list for shipping services. It is the sum of the charges levied by a sea carrier for moving goods from point A to point B.

A sea freight quotation can be divided into three groups, as follows:
1. Pre-transport (pre-carriage)
2. Sea transport (carriage)
3. Post-transport (on-carriage)

For each group there is a list of standard charges. Depending on the mode of transport and the other associated services involved, a shipper or consignee will end up paying many other charges.

The pre-transport quotation (pre-carriage)

Pre-Carriage is the term given to any movement overland that takes place before the moment when the cargo is loaded at a port of loading. Such activities may be in the same location as the port of loading or in a place close to it, and include:

• Chassis usage surcharge – a charge imposed for the use of a chassis on which the container is carried overland from the shipper's door to the port.
• Fuel surcharge – a fuel supplement applicable to the transport.
• Packing charges – a warehouse may levy a charge for loading the cargo into the container at its premises. If the cargo is loaded directly at the shipper's premises, this charge will not apply.
• Customs formalities fee – a fee paid to the customs broker.
• Wharf charge (wharfage) – a charge assessed by a pier or dock owner for goods handled over the pier or dock, or for a shipping company that uses the wharf or dock.
• Documentation fees – fees that may apply for preparing the export documentation (the certificate of origin, licences, etc.).
• OTHC (Origin Terminal Handling Charge)

The pre-transport activity may be carried out by a carrier using road or rail modes, or by the customer.

The quotation for the sea transport itself (carriage)

Carriage is the term given to the actual movement of the goods by sea by the shipping line from the port of loading to the port of discharge. In accordance with the contract of carriage and the mutually agreed service, each carrier will have its own applicable charges in its tariff for transport services.

• Sea freight rate – the basic freight charge for carrying the cargo/container from port A to port B
• BAF (Bunker Adjustment Factor) – used to compensate shipping lines for fluctuating fuel costs. It is sometimes called FAF (Fuel Adjustment Factor) – a factor for adjusting the cost of fuel.
• ISPS (International Security Port Surcharge) – the surcharge for international port security.
• BL fee (bill of lading fee) – a fee charged by the shipping line for processing the bill of lading on the customer's behalf.
• EBS (Emergency Bunker Surcharge) – a surcharge is added to the freight cost to cover fuel costs.
• EIS (Equipment Imbalance Surcharge) – a surcharge imposed by shipping lines to recover the costs of removing large quantities of empty containers from a country or countries where there is no export use for them

The charge is usually a flat rate per container. It is not necessarily applied in all transactions or at all times. It is applied only when such trade imbalances require heavy expenditure on moving empty containers from one place to another.

Other charges

• Destination Environmental Fee – covers various unforeseen situations, such as the costs of cleaning up oil spills and other mandatory charges.
• ERR (Emergency Rate Restoration) – an emergency restoration of the rate. Added to the freight cost to cover increases in sea transport costs.
• ERS (Equipment Repositioning Surcharge) – the surcharge for repositioning equipment. Applied when a shipper asks the carrier to make available empty containers that have to be moved from one location to another.
• Dangerous goods surcharge – a surcharge imposed for the carriage of hazardous materials or dangerous goods.
• Piracy surcharge – a surcharge assessed to compensate shipping companies for the increased costs associated with avoiding piracy and hijacking.
• CAF (Currency Adjustment Factor) – a charge expressed as a percentage of the base rate. It is applied to compensate ocean carriers for currency fluctuations.
• Cargo information declaration fee – assessed for the additional costs of declaring cargo information in advance to the European Union authorities. The authorities need it in order to assess any potential security and safety threats.
• Congestion surcharge – reflects the additional expenses that shipping lines incur when they call at congested ports.

The post-transport quotation (on-carriage)

On carriage is the term given to any movement that takes place after the cargo is unloaded at a port of discharge.
Such activities may take place in the same location as the port of discharge or in a location close to it, and include:

• Chassis usage surcharge – a charge imposed for the use of a chassis on which the container is carried overland from the port to the consignee's door.
• Fuel surcharge – a fuel supplement applicable to the transport.
• Unpacking charges – a warehouse may levy a charge for unloading the cargo from the container at its premises.
• Customs formalities fee – a fee paid to the customs broker
• Wharf charge (wharfage) – a charge assessed by a pier or dock owner for goods handled over the pier or dock, or for a shipping company that uses the wharf or dock.
• Documentation fees – fees that may apply for preparing the import documentation.
• CYRC (Container Yard Receiving Charge) – the charge for receiving containers at the container yard.
• DDC (Destination Delivery Charge) – a charge based on the size of the container. It covers the crane lift off the vessel, moving the container within the terminal and the terminal gate fees.
• Demurrage/Detention – a penalty against consignees for delaying the carrier's vessel beyond the free time allowed.

Demurrage is a charge levied on the importer by the shipping line when the importer has not picked up the full container and moved it out of the port/terminal area for unpacking within the free days allowed.

Detention is a charge levied on the importer by the shipping line when the importer has picked up the full container and moved it out of the port/terminal area for unpacking, but has not returned the empty container to the designated place, the shipping line's container depot.

• DTHC (Destination Terminal Handling Charge)
• FS (Fuel surcharge)
• Handling charge – a charge for transporting, storing or packing the goods.
• Release fee – a fee charged by the port of destination for releasing the cargo for onward movement or further action.
• TAD (Transit Accompanying Document) – a document that accompanies goods not cleared through customs during transit from one authorised location to another.

The post-transport activity may be carried out either by a carrier using road or rail modes or by the customer itself.

Terminal handling charges

Terminal handling charges (THC) = container service charges (CSC – Container Service Charges). They are charges levied by shipping terminals for storing and positioning containers before they are loaded onto a vessel. The charges usually consist of cargo handling, unloading the container, stacking and the crane service.

Terminal handling charges are paid at the port of origin (OTHC), the transhipment port and the port of destination (DTHC).

The legal standing of a transport quotation

In general, the sea carrier states on its offers that they are subject to its terms of carriage. The choice of law and jurisdiction is included, which makes the offer legal and binding.

A quotation can therefore come with a great many terms and conditions of its own. Once the offer has been accepted and the cargo shipped, there is no room for any dispute.

Even if there is no direct acceptance of an offer by a shipper, but the shipper books the cargo with the carrier, the carrier will regard the act of booking the cargo as an acceptance of its offer.

It is very important for a shipper to read and understand all the terms and conditions clearly and correctly before agreeing to ship the cargo with that carrier.

Honexpres offers complete sea freight services. From the shipper’s door to your door, including inland transport and customs procedures.

We are not only a freight forwarder providing professional services in organising domestic and international transport and advice on insurance. Honexpres also brings you essential information and relevant news from the world of freight transport!