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A Comprehensive Guide to Understanding Ocean Freight Rates

Your business has been expanding a lot lately, so it’s time for you to start sending your products further and further. One of the best ways to transport these goods is by water

But how can ocean freight help your business with distribution and fulfillment solutions? What are ocean freights used for anyway? And how does their pricing work?

The good news is that ocean freights can ship just about anything. You just need a guide to understanding ocean freight rates that makes sense to you. 

Read on to learn how shipping and logistics companies price their ocean freight services.

Base Rate

The first thing that affects the cost of ocean freight is the base rate. This is the amount of money your shipping partner charges to move a ship from one port to another. 

This is because of the amount of fuel it takes to get your cargo to its destination. Large cargo vessels use a lot of diesel fuel even over short distances. This kind of fuel isn’t cheap, so shipping companies need to charge extra to cover that payment.

It’s also going to pay for the crew’s expenses while they’re moving your cargo. The crew could be on board the ship for several days or more. If this is the case, then they need to sleep and eat at some point while they’re there. That means there needs to be bedding and food onboard.

Then they’re also providing you a service by moving your cargo from one place to another. Everyone onboard has a job to do that makes sure this gets done safely. Therefore, these people expect to get paid for their labor.

All of this creates the base rate of moving your cargo from one port to another.

Weight

Think about what items you’re trying to ship. How much do they weigh? How many are you planning to ship?

The next thing that affects the price is how much your cargo weighs. The heavier something is, the harder it is to move.

This creates a lot more work for the crew and dock workers loading up the ship. That means that your labor costs for shipping your cargo go up the more your cargo weighs.

The same thing is going to happen when the ship reaches its destination. If you have heavier cargo, then it costs more to take it off the ship and onto the docks.

Not to mention heavier cargo might slow a ship down more than heavier cargo will.

But if you have lighter cargo, then the cost to load and unload is going to be less. That means items like teddy bears are going to cost a lot less to ship than gym equipment for example.

In other words, if you’re trying to save some costs, you might consider sending smaller shipments or selling lighter items. Otherwise, you shouldn’t be surprised when you spend more to ship heavier items. 

Distance

The next thing you should consider is how far you want your cargo to go. Are you trying to send something from New York City to Savannah, Georgia? Or are you shipping internationally?

This is going to affect the price for three main reasons.

The first reason is because of fuel. The farther the ship needs to go, the more fuel it’ll use to get there. The costs of this fuel add up quickly when you’re moving a large cargo ship. 

The second big reason is labor costs. The farther the ship goes, the longer the entire crew is onboard the ship. This means that they’ll be working longer to make sure your cargo arrives safely.

And the last reason is customs charges. If you’re shipping domestically, then this won’t be an issue. However, if you’re shipping internationally, then you’re going to need to go through customs.

As part of international border security, customs will examine the contents of your cargo and check it against your documentation. This ensures that you aren’t bringing any dangerous or illegal substances onto a different country’s soil. But this takes time and labor that your shipping partners will need to pay for.

In short, the farther you want to send your cargo, the more it will cost to do that.

Route

Distance isn’t going to be the only thing that affects the price of shipping, but the destination and the route can also be a factor. The reason for this is because some areas have rougher waters or require special attention to navigate. In other cases, it’s because of extra fees or tolls charged to travel in certain directions.

For example, if a United States cargo ship was found in certain waters, then there might be some diplomatic issues if there isn’t a good explanation and documentation for this. This means that ships need to slow down in certain areas to prevent such diplomatic issues and ensure the safety of the crew and cargo. 

This means that it takes longer to go through these areas, and it’s more dangerous for the crew. To account for this, there is usually an extra charge to go through these areas.

If you have to go through canals, then you might also experience some slowdowns. The ship will also usually have to pay a toll to go through the canal to reach its destination. This charge is usually included in service fees to account for such events.

Packaging

The next thing you need to decide is if you want to have your items already packaged in a shipping container or not. You can choose whichever way you want to handle it, but it will affect the cost of your shipping. This is mainly because of the labor costs involved in moving shipments.

If your shipment isn’t already in a shipping container when it arrives at the docks, then it will have to be packaged into one when it gets there. This means that the crew and dock workers have more work to do to make sure your cargo arrives safely.

Then, when it does arrive at the next port, oftentimes they’ll need to unpackage the shipment from the container as well. This again adds more labor to dockworkers and crew. 

In other words, businesses on a budget will want to consider investing in their own shipping containers that they can use. This means that when their shipments arrive at the port they can be put onto the ship right away instead of needing to be organized and packaged up. There is no extra labor involved in getting this part done.

guide to understanding ocean freight rates

Documentation

Every item that’s going in and out of ports needs to have documentation. The crew will hold on to these documents in case they get inspected by groups like customs. This is fairly routine to protect the country’s citizens from dangerous and illegal substances being brought into the country.

The good news is that an experienced ship crew will know where these inspection points are. They’ll be anticipating these events and will be prepared for them when they reach them.

One issue with this is that it means that documentation needs to be created and stored on the ship until it’s needed. This way, the crew is ready to present it when they’re expected to. And you won’t have any issues getting your cargo where it needs to be after that.

This documentation needs to be thorough, legally created, and valid to be accepted. Otherwise, the ship may have an issue delivering your products.

The crew is typically responsible for creating this documentation and keeping it until it’s needed. The shipping company passes on this charge to the client to account for this. That’s why you will usually see a documentation fee on your ocean freight pricing.

Handling

Handling generally refers to how often your shipment needs to be physically moved from one place to another. For example, if your shipment is already in a shipping container, then it gets moved onto the ship and secured. It gets moved again when it arrives at its destination to be unloaded.

But some items need to be handled with more care than others. Pottery and glassware, for example, are fragile and need to be moved gently to avoid being damaged during transport. But fabrics and plastic toys should be fine no matter how they’re handled.

This means that certain items can take a little longer to load and unload from the ship. This creates a little extra work for the docks and crew, so they have to charge extra for handling these items.

The crew may also need to keep an eye on your shipment during transport to ensure that your goods don’t get damaged. This too creates more work for the crew.

The extra costs of this are therefore passed on to the client as handling fees. So if you’re shipping fragile materials, then expect to pay a bit more in handling. And you can expect the opposite if your cargo has no special handling instructions.

Hazardous Goods

Some clients may want to ship fragile materials while others are shipping potentially hazardous materials. These hazards might be toxins, fire, or biohazards for example. Whatever the case, these goods need to be handled with the utmost care the entire time your shipping company has them.

This means extra precautions to keep the crew safe. If there’s a fire or biohazard risk on the ship, then the crew needs to be aware of that. This way they can be ready to deal with any potential emergencies in regards to your cargo.

This also means extra documentation declaring that there is a risk of hazards onboard the ship. Otherwise, customs may not allow the ship into port to deliver your cargo.  

In other words, you’re creating extra work for the crew. There is also an increased risk to the crew because of your cargo. This means that there is an increased cost in labor to ensure the safety of the crew and your cargo.

This is called a hazard fee. This fee allows the shipping company to pass on the extra costs of a shipment to the client. So if you need to ship materials that can be potentially dangerous, then expect to pay a little extra.

Piracy

Piracy refers to the criminal act of boarding and hijacking a ship illegally. This isn’t just something that happens in movies. It’s a real issue that many cargo ships still worry about today

Any time a ship goes out onto open waters, they leave themselves open to piracy. This kind of crime is extremely dangerous for the crew. It leaves them open to injury, trauma, and possibly death.

It also can lead to the loss of cargo if such an event occurs. Shipping companies will often get insurance for their ships and cargo for this reason. If something happens to the transport, the client can get refunded and the company doesn’t lose money. 

This can also increase the cost of your shipment since it might take extra work to protect the ship, its crew, and its cargo from piracy during transport. And there are certain areas where piracy is more common than others.

Therefore, if your shipment has to go through these areas, then you can expect to pay a little extra to protect your cargo from pirates. This ensures the safety of your cargo and the crew during the entire journey.

Let Us Be Your Guide to Understanding Ocean Freight Rates Today

Now that you have a guide to understanding ocean freight rates, you should have a better idea of how much your own cargo will cost to ship. Now you just need a partner you can trust for global shipping.

And when you’re ready to do that, Onsite Global Logistics is here to help. We’re one of the leaders in supply chain solutions for a reason. We’re dedicated to excellent service that keeps your business flowing.

Contact us today and see how we can help your business.

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