Understand Common Shipping Charges and How to Reduce Them

Jul 09,2024
Industry News
What are the common shipping miscellaneous charges? From ORC to BAF, how to effectively reduce ocean shipping miscellaneous charges and reduce logistics transportation costs

In the process of international ocean shipping, ocean shipping is an affordable and widely used mode of transportation. In addition to the obvious transportation costs, there are many subtle miscellaneous charges that often inadvertently increase logistics costs. This article will explore the common types of ocean shipping miscellaneous charges in depth, share practical methods and money-saving tips to reduce freight costs, help you better understand and control logistics costs, and ultimately maximize cost-effectiveness.

Shipping Charges

What are the common shipping miscellaneous charges?

THC/ORC (Terminal Handling Charge)

Terminal Handling Charge (THC) or Origin Receipt Charge (ORC) is the cost incurred during the loading and unloading of goods at the port, usually charged by the shipping company or terminal. Origin Receiving Charge (ORC) Ensure that your goods are properly documented and labeled to avoid additional handling charges.

BAF/FAF (Bunker Adjustment Factor)

Bunker Adjustment Factor (BAF) or Fuel Adjustment Factor (FAF) is an additional charge due to fuel price fluctuations, intended to compensate shipping companies for increased costs due to rising fuel costs.

CIC (Container Imbalance Surcharge)

Due to the uneven distribution of containers in import and export trade, resulting in a shortage of empty containers in some regions, shipping companies may charge exporters a container imbalance surcharge to encourage more empty containers to return.

CAF (Currency Adjustment Factor)

Currency exchange rate adjustment fee refers to when the local currency depreciates relative to the international settlement currency, shipping companies may charge a currency depreciation surcharge to compensate for the loss caused by exchange rate changes.

PSS (Peak Season Surcharge)

Peak Season Surcharge is an additional charge imposed by shipping companies during peak transportation demand periods. This charge usually occurs at certain times of the year, especially when the demand for cargo transportation exceeds the transportation capacity. The main reasons and purposes for the collection of PSS include:

  1. Transport capacity limitation: When the demand for cargo transportation exceeds the available transport capacity, shipping companies may levy PSS to balance the supply and demand relationship.
  1. Increased operating costs: During the peak season, shipping companies may need to pay additional port usage fees, labor costs, etc., and PSS helps to cover these costs.
  1. Regulating the market: PSS can be used as a market regulation method to guide the reasonable distribution of cargo transportation through price mechanisms.

The specific amount of PSS will vary depending on factors such as routes, cargo types, and market conditions. When formulating logistics plans, companies need to take this potential cost into account and try to take it into account in contract negotiations.

Destination Delivery Charge

The destination delivery charge refers to the cost incurred by transporting the goods from the ship or terminal to the final destination after unloading at the destination port. DDC usually includes the following aspects:

  1. Transportation costs: transportation costs from the port to the consignee's designated location.
  1. Terminal charges: costs incurred at the destination terminal, which may include unloading, storage, etc.
  1. Customs clearance costs: costs incurred during the customs clearance of goods at the destination port.
  1. Other service fees: may include other service fees such as cargo inspection, handling, temporary storage, etc.

The specific amount of DDC will also vary depending on factors such as the weight and volume of the cargo, the distance of the destination from the port, and the local transportation cost. When calculating logistics costs, companies need to take DDC into account to ensure accurate budgeting.

Booking Fee

Booking fee refers to the cost incurred when the import and export company or its agent entrusts the shipping company to book the space for shipping goods. We can avoid temporary booking by planning the cargo transportation in advance to reduce additional costs.

THC Fee (Terminal Handling Charges)

THC fees are fees related to container operations, including operations from the ship's side to the container yard or from the container yard to the ship's side. THC fees can reduce THC fees by optimizing loading and unloading plans and reducing the number of operations.

Sealing Fee

Sealing fee refers to the fee charged by the shipping company to the cargo owner for the "lock" (lead seal) on the container after loading during sea transportation. The common way to reduce this fee is to use lead seals reasonably and avoid waste.

Customs Declaration Fee

Customs declaration fee refers to the customs declaration fee paid by import and export enterprises to the customs declaration agent. Using an efficient customs declaration agent can reduce unnecessary customs declaration expenses.

Trucking Fee

Trucking fee is the trailer fee charged according to the distance. Negotiate the price with the trucking company to find the most cost-effective solution.

VGM Fee (Verified Gross Mass Fee)

VGM fee refers to the verified container weight, including the weight of the cargo, container tare weight and packaging. Avoid additional costs by accurately measuring the weight of the cargo and container.

Equipment Handling Fee

Equipment Handling Fee is the fee for using equipment to pick up containers at the terminal. Avoid unnecessary costs by properly planning the use of equipment.

Port Security Facility Fee (ISPS)

As the name suggests, it is the port security facility fee. By understanding the port security policy, avoid additional costs caused by violations.

Telex Release Fee

Telex Release Fee is a service fee for telex bills of lading. Document fees, bill of lading fees and electronic release fees cover the costs of various document processing, bill of lading issuance and electronic release services related to cargo transportation. Negotiate the electronic release fee with the shipping company to avoid unnecessary expenses.

Inspection Fee

The cost of customs inspection of goods at the shipping mark is called inspection fee. Complying with customs regulations and reducing the number of inspections can effectively reduce the expenditure of inspection fees.

Practical methods to reduce the cost of international shipping miscellaneous fees

Understanding and mastering the strategy of reducing shipping miscellaneous fees is crucial to controlling logistics costs. Here are some practical ways to reduce costs:

Advance planning and price inquiry

Planning cargo transportation in advance and comparing prices with multiple logistics service providers can effectively find the most cost-effective transportation plan. At the same time, pay attention to market freight rate fluctuations and choose the best time to book space. Understand the charging standards of different shipping companies and freight forwarding companies, compare quotes, and choose the most cost-effective service.

Optimize cargo packaging and loading

Reasonable cargo packaging can reduce the risk of damage, reduce volume and weight, and improve container utilization, thereby reducing transportation costs. In addition, work closely with logistics service providers to optimize loading plans and reduce space waste.

Take advantage of logistics agreements and service packages

Signing a long-term cooperation agreement with a logistics service provider or choosing a service package provided by it often allows you to enjoy more favorable prices and more comprehensive services. Professional logistics service providers such as Chinadivision usually provide customized solutions and price discounts for long-term customers, and usually get more favorable prices.

Consolidate freight

Combining multiple batches of goods into one batch can reduce handling fees and overall transportation costs. By centrally purchasing goods, you can improve your bargaining power with logistics service providers, strive for lower miscellaneous fee rates, and reduce the transportation cost per unit of goods.

Pay attention to policy changes and preferential measures

Pay close attention to international trade policies, tariff adjustments, and preferential measures in the logistics industry, such as government subsidies and tax incentives, and adjust transportation strategies in a timely manner to reduce costs.

In addition to the common miscellaneous fees mentioned above, there are also some additional fees that may be incurred due to routes, types of goods, or special needs. Understanding the causes and billing standards of these fees is the key to developing an effective money-saving strategy. At the same time, keeping close communication with logistics service providers and understanding the latest money-saving tips and preferential policies is also an effective way to reduce logistics costs.

From ORC to BAF, how to effectively reduce shipping costs?

Each type of cost has its own specific conditions and calculation methods. By deeply understanding the composition of these costs, companies can take more targeted measures:

ORC: Understand the origin and destination of the goods and choose the best transportation route.

BAF: Pay attention to fuel price fluctuations, choose the right transportation time, and reduce cost fluctuations.

Costs such as ORC and BAF may vary for different routes. By comparing the comprehensive costs of different routes, choose the most cost-effective transportation plan.

Revealing the secrets of saving money on shipping costs in logistics

In addition to the above methods, companies can further reduce shipping costs in the following ways:

Digital management: Use logistics management software to monitor transportation costs in real time, discover and adjust strategies in time.

Risk management: Avoid risks that may occur during transportation and reduce additional costs through insurance and other means.

Through the above methods, companies can more effectively manage shipping costs and reduce logistics costs. As a professional international logistics fulfillment service provider, chinadivision has rich industry experience and advanced technology platforms to help your company optimize logistics costs. We look forward to working with you to explore effective ways to reduce logistics costs.

If you would like to learn more about how to reduce shipping costs, or want to have your logistics needs managed by a professional team, please feel free to contact Chinadivision to learn how we can simplify your logistics operations and reduce your overall transportation costs.

About the Author: Limi

About the Author: Limi

Limi is a content marketing expert at ChinaDivision, helping businesses and e-commerce sellers navigate the complexities of international shipping by providing actionable tips and comprehensive guides on logistics, shipping, and cargo transportation.