Seafreight calculations can broadly be divided into two main components; breakbulk and containerised. In this section we deal with how you should calculate the freight costs of both of these two types of seafreight.
Break bulk cargo calculations
Break bulk cargo, is cargo that is unitised, palletised or strapped. This cargo is measured along the greatest length, width and height of the entire shipment. The cargo is also weighed. Shipping lines quote break bulk cargo per “freight ton”, which is either 1 metric ton or 1 cubic metre, which ever yields the greatest revenue.
Example:
A case has a gross mass of 2 Mt.
The dimensions of the cargo are:
2.5 X 1 X 2 metres
The tariff rate quoted by the shipping line is: USD 110.00 weight or measure (freight ton)
Step 1
Multiply the metres 2.5 X 1 X 2 = 5 metres Compare to the mass = 2 Mt.
Step 2
Calculate the freight with the greater amount either the mass or the dimension. 5 X USD 110.00 = USD 550.00
Freight would be paid on the measurement and not the weight. All shipping lines carrying cargo in a break-bulk form insist on payment based on a minimum freight charge which is equivalent to one freight ton, one cubic metre or one metric ton.
Full Container load calculations and surcharges
Freight rates for containers are based on the container as a unit of freight irrespective of the commodity or commodities loaded therein, (FAK) Freight All Kinds. The shipping lines quote per box (container) either a six or twelve metre container. From time to time, abnormal or exceptional costs arise in respect of which no provision has been made in the tariffs. For example a shipping line cannot predict the movement of the US Dollar or the sudden increase of the international oil price. These increases have to be taken into account by the shipping line in order to ensure that the shipping line continues to operate at a profit. These increases are called surcharges. All shipping lines accordingly retain the right to impose an adjustment factor upon their rates taking into account these fluctuations. All surcharges are expressed as a percentage of the basic freight rate. Surcharges are regularly reviewed in the light of unforeseen circumstances, which may arise and bring cause for a surcharge increase.
Bunker Adjustment Factor (BAF)
“Bunkers” is the generic name given to fuels and lubricants that provide energy to power ships. The cost of bunker oil fluctuates continually and with comparatively little warning.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
US Dollar 1 250.00 X 5.2% = US Dollar 65.00
Add the two amounts together
Freight rate: U S Dollar 1 315.00
War Surcharge
The outbreak of hostilities between nations can have a serious effect upon carriers servicing international trade even though they may sail under a neutral flag. Carriers sailing within the vicinity of a war zone may impose a war surcharge on freight to compensate for the higher risks involved and the higher levels of insurance premium, which they may be obliged to pay.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ WAR 5%
US Dollar 1 250.00 X 5% = US Dollar 62.50
Add the two amounts together
Freight rate: U S Dollar 1 35.50
All of the above surcharges may be applied to a single freight rate.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ BAF 5.2%
+ CAF 6.3%
+ WAR 5%
Total amount of surcharge 16.5%
US Dollar 1 250.00 X 16.5% = US Dollar 206.25
(add to freight rate)
US Dollar 1 456.25
The bill of lading
The bill of lading performs the following functions:
- A contract of carriage between the shipper of the cargo and the carrying shipping company.
- The name of the shipper and the receiver of the goods the consignee.
- The contents of the packages as declared by the shipper.
- Shipping details such as: port of loading and the port of discharge.
- The bill of lading is a freight invoice and indicates if the freight costs have been prepaid by the exporter or will be paid by the importer, “freight collect”.
- The bill of lading states the number of packages, weight and dimension of the shipment.
- It is a document of title to the goods stated thereon.
Every original bill of lading signed by or on behalf of the shipping company is a document of title to the underlying goods. This special function of a bill of lading is achieved by a form of words which state: “In witness whereof the undersigned on behalf of the shipping company has signed three bills of lading all of this tenor and date, one of which being accomplished the others to stand void”. “Accomplishing” the bill of lading requires the surrender to the shipping line or its agents in the port or place of destination one of the signed original bills of lading duly endorsed by the consignee/importer. Unless and until one of the original bills of lading as described above is surrendered, the shipping line will not release the cargo to the consignee/importer. Upon surrender of any one of the originals the other originals bills of lading become void.
Currency Adjustment Factor (CAF)
The currency adjustment factor is a mechanism for taking into account fluctuations in exchange rates, these fluctuations occur when expenses are paid in one currency and monies earned in another by a shipping company. The currency adjustment factor is a mechanism for taking into account these exchange rate fluctuations. It is always expressed as a percentage of the basic freight and is subject to regular review.
Example:
Freight rate: Port Elizabeth to Singapore
Freight rate: US Dollar: 1 250.00 per 6-M container
+ CAF 6.3%
US Dollar 1 250.00 X 6.3% = US Dollar 78.75
Add the two amounts together
Freight rate: U S Dollar 1 328.75
Port Congestion Surcharge
Congestion in a port for a period of time can involve considerable idle time for vessels serving that port. When a ship lies idle, this creates a huge amount of loss for the ship’s owner. Shipping lines therefore have the right to impose a surcharge on the freight to recover revenue lost. Another factor which influences port congestion surcharge would be labour disputes. Port congestion surcharges are calculated as a percentage of the freight rate as expressed in the previous examples.
Consolidation services
The consolidator or groupage operator hires a container from a shipping line and then sells that space to his clients/exporters. The benefit for the exporter is that small quantities which, would not fill a full container load, can be shipped by sea freight in a shipping container as an alternative to air freighting the goods. The consolidator would charge per metric ton or cubic metre, which ever yields the greatest. Example: US Dollar 89.00 Weight or Measure. The shipping line would have a contract of carriage with the consolidator and in turn the consolidator would have a contract of carriage with the exporter. The consolidator would be issued with an combined through bill of lading from the shipping line and then present the exporter with a house bill of lading (See bill of lading below)
Endorsed Bills of Lading
Bills of lading can only be issued with the words “shipped on board”, if the cargo has actually been loaded onto the named vessel at the port of loading. By insisting that the exporter supplies the importer with a “shipped on board” bill of lading, the importer obtains conclusive evidence that the goods have been loaded on board the intended vessel.
Some importers insist that the exporter presents “shipped on board” bills as a condition for payment. “Received for shipment”, bills of lading can be issued as soon as the goods have been delivered into the custody of the carrying shipping company or its agent either at the point of receipt or at the port of loading. Thus, a ‘received for shipment”, bill of lading will only indicate the ship in which the cargo is intended to be loaded on. The risk remains that the loading may, for many reasons delayed or the cargo may not be loaded at all.
Banks responsible for the payment of funds in payment for goods under letters of credit will not release the funds if the bill of lading has been endorsed “received for shipment”.