Ocean Freight and Shipping Cost Terms
Freight and surcharges
| Term | Description |
|---|---|
| Ocean Freight / Basic Freight | The sea carriage charge from the port of loading to the port of discharge; per container for FCL, per W/M (tonne or m³) for LCL. |
| All-in | Freight + specified surcharges combined in a single price. Which items are included (e.g. is THC included?) must always be confirmed in writing. |
| BAF (Bunker Adjustment Factor) | Fuel price adjustment; updated as fuel costs change. Since 2020, also seen as LSS / "Low Sulphur Surcharge" due to low-sulphur fuel. |
| CAF (Currency Adjustment Factor) | Currency fluctuation surcharge; usually a percentage of the freight. |
| THC (Terminal Handling Charge) | Container handling charge at the terminal. Divided into OTHC (port of origin) and DTHC (port of destination); who pays depends on the Incoterms rule. |
| PSS (Peak Season Surcharge) | Peak season surcharge. |
| GRI (General Rate Increase) | A general freight increase applied by the shipping line from a specified date. |
| ISPS | Security charge levied under the International Ship and Port Facility Security Code. |
| Seal Fee | The cost of the numbered security seal fitted to the container. |
| B/L Fee / Documentation Fee | Bill of lading issuance and document processing fee. |
| Storage charges | Storage fee charged by the port/terminal operator after the free time at the terminal or warehouse has been exceeded. |
| Demurrage | Charge paid to the shipping line when the container remains inside the terminal beyond the free time granted by the line. |
| Detention | Charge paid to the shipping line when the container is kept outside the terminal (at the consignee's warehouse) beyond the free time and its empty return is delayed. |
| D&D (Demurrage & Detention) | Term referring to both items together; some shipping lines grant combined free time. |
| Free time | Number of days granted free of charge before demurrage/detention begins (typically 3–14 days; depending on port, line and agreement). Additional free time can be negotiated at the booking stage. |
Note: In some countries, the term "demurrage" is used for both items; check on the invoice which item is charged for which period.
Types of bill of lading (B/L)
- Document of title: The bill of lading is (1) a receipt for the goods, (2) evidence of the contract of carriage and (3), when issued to order or to bearer, a document of title representing the goods.
- Master B/L (MBL): The bill of lading issued by the shipping line (vessel operator) to the forwarder.
- House B/L (HBL): The bill of lading issued by the forwarder/NVOCC to the actual shipper.
- Original B/L: Usually issued as a set of 3 originals; the consignee must present one original to take delivery of the goods.
- Telex release / Surrender B/L: The original bills of lading are surrendered to the shipping line at the port of origin, and an electronic "release" instruction is sent to the agent at destination. It is fast, but the seller loses control of the goods once it gives this instruction.
- Seaway Bill: Not a document of title and non-negotiable; the goods are delivered to the named consignee without presentation of an original. Suitable for trusted buyers and intra-group sales.
- On Board B/L: Shows that the goods have been loaded on board a specific vessel; generally mandatory under letters of credit. A Received for Shipment B/L, by contrast, means that the goods have been received but not yet loaded.
- Clean B/L: A bill of lading bearing no clause indicating defects in the goods or packaging. One with a damage clause is called a claused / dirty B/L; banks generally reject it under letters of credit.
- To Order B/L: The consignee field reads "to order" or "to order of [bank]"; it can be transferred by endorsement. In letter of credit and documents against payment transactions, it gives the bank control over the goods.
- Straight B/L: Issued to a named person; cannot be transferred by endorsement.
Operational terms
| Term | Description |
|---|---|
| Liner (liner shipping) | Regular sailings on a fixed schedule between specified ports; container shipping operates on this basis. |
| Tramp (tramp shipping) | Vessels without a fixed schedule, chartered according to the cargo; common for bulk cargo (grain, coal, ore). |
| Transit Time | The time from departure from the port of loading (ETD) to arrival at the port of destination (ETA). Typical example: Mersin – Jebel Ali, direct or with transshipment, ~14–25 days (varies by line and route). |
| Cut-off | The deadline (date/time) for delivering the container to the terminal (CY cut-off), submitting documents/instructions (SI/doc cut-off) and declaring the VGM. If missed, the container is moved to the next vessel (roll-over). |
| ETD (Estimated Time of Departure) | Estimated time of departure. |
| ETA (Estimated Time of Arrival) | Estimated time of arrival. |
| Transshipment | Transfer of the cargo to another vessel at an intermediate port (hub) before it reaches its destination. Care is needed if the letter of credit prohibits transshipment. |
| Booking | Reserving space with the shipping line; the empty container is picked up against the booking confirmation. |
| NVOCC | Non-vessel-operating common carrier that issues its own bills of lading (mostly a forwarder). |
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Sources
- ICC – Incoterms® 2020: https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/
- ICC – Incoterms rules history and overview: https://iccwbo.org/business-solutions/incoterms-rules/
- ICC – UCP 600 / Documentary credits: https://iccwbo.org/business-solutions/trade-finance/
- Hapag-Lloyd – Container Specification (PDF): https://www.hapag-lloyd.com/content/dam/website/downloads/press_and_media/publications/15211_Container_Specification_engl_Gesamt_web.pdf
- Hapag-Lloyd – 40' Standard High Cube: https://www.hapag-lloyd.com/en/services-information/cargo-fleet/container/40-standard-high-cube.html
- Hapag-Lloyd – 40' Standard: https://www.hapag-lloyd.com/en/services-information/cargo-fleet/container/40-standard.html
- Hapag-Lloyd – 40' Flatrack: https://www.hapag-lloyd.com/en/services-information/cargo-fleet/container/40-flatrack-high-cube.html
- Hapag-Lloyd – 40' Open Top: https://www.hapag-lloyd.com/en/services-information/cargo-fleet/container/40-open-top-high-cube.html
- ISO 668 – Series 1 freight containers: https://www.iso.org/standard/76912.html
- IMO – SOLAS Verified Gross Mass: https://www.imo.org/en/OurWork/Safety/Pages/Verification-of-the-gross-mass.aspx
- IATA – Air Cargo / e-AWB / ULD: https://www.iata.org/en/programs/cargo/
- IATA – Dangerous Goods Regulations: https://www.iata.org/en/publications/dgr/
- IPPC – ISPM 15: https://www.ippc.int/en/publications/640/
- EPAL – Euro pallet specifications: https://www.epal-pallets.org/
- EU Directive 96/53/EC (vehicle weights and dimensions): https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:31996L0053
- UNECE – CMR Convention: https://unece.org/transport/road-transport
- IRU – TIR system: https://www.iru.org/what-we-do/facilitating-trade-and-transit/tir
- TOBB – TIR and ATA carnets: https://www.tobb.org.tr/
- Kuehne+Nagel – Incoterms 2020 overview: https://www.kuehne-nagel.com/us/how-to/customs-clearance/incoterms
- Wikipedia – Incoterms (for general cross-checking): https://en.wikipedia.org/wiki/Incoterms