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Sea Freight (Shipping)
Sea freight is generally more cost-effective compared to other modes of transportation. The shipping rates are determined by supply and demand, much like other forms of transportation. However, limitations in sea freight are mainly related to port facilities and equipment, which can increase the shipping costs.
Sea Freight Contract
- Contract Definition: This is an agreement made between the exporter (the seller of the goods) and the ship owner (the carrier or freight operator).
- Bill of Lading Definition: A bill of lading is a document issued by the carrier or their agent, acknowledging the receipt of goods for shipment. The sea bill of lading serves as the title of ownership of the goods, meaning that only the holder of this bill can claim the goods.
- The bill of lading is a receipt provided by the ship owner confirming that the goods have been received for transport.
Classification of Ships by Activity
Shipping companies typically operate in different ways:
- Liner Services (Regular Services):
- These ships follow predetermined routes.
- They operate on set schedules.
- They carry general cargo of various sizes and weights, often from multiple owners.
- Tramp Services (Irregular Services):
- These ships do not follow scheduled routes.
- They operate based on demand from the cargo owner.
- The cargo type and destination are typically decided by the owner, such as bulk goods like iron ore, wheat, etc.
Freight Rates: Specific and Groupage Rates
Freight forwarders, such as Easy Trade, often offer specific rates for groupage shipments. In this system, the forwarder consolidates small shipments from different customers into a larger shipment, and the carrier provides discounts for bulk shipments. This benefits all parties involved: the cargo owner, the carrier, and the forwarder.
Containerization
Goods are packed in various forms, such as cartons, pallets, wooden boxes, metal drums, and jumbo bags. For international transport, containers are used. Containers can be employed for different transportation modes, including sea, air, rail, and road.
Types of Containers
- General Purpose Container (GP): Suitable for all types of cargo.
- Special Purpose Containers: Used for specific types of cargo, such as cars or livestock.
- Platform Containers: These are open containers used for specific loads.
Freight Rates with Containers
The rates for container shipping depend on the cargo’s volume, the container’s utilization, and whether the container is fully loaded. If the shipment doesn’t fill the container, the shipping cost may vary based on the space used.
Shipping Costs
The overall cost of shipping involves multiple components:
- Packaging, loading, and unloading costs
- Customs duties, port fees, and storage charges
- Freight rates
- Customs and documentation fees
Additional Costs in Sea Freight
- Port Charges: Including entry fees, loading, unloading, and anchoring fees.
- Tugboat and Pilotage Fees: For guiding the ship into port.
- Dredging Costs: For keeping the waterway navigable.
- Docking Fees: For mooring at the port.
- Crew and Provisions: The costs of maintaining and operating the vessel, including food, spare parts, and communications.
- Quarantine and Health Checks: Related to the health and safety regulations of the port.
Types of Freight Charges
- Advance Freight: Paid before shipping, commonly used for liner services.
- Freight Charter: Payment for the rental of an entire ship, regardless of the cargo size.
- Compensatory Freight: A form of damage claim when part of a shipment is not delivered as agreed.
- Back Freight: When goods are returned due to non-acceptance at the destination.
- Pro-Rata Freight: When goods are not delivered to the final destination and are unloaded at an intermediate point, freight is calculated based on the distance traveled.
- Ad Valorem Freight: Freight determined based on the value of the goods being shipped.
- Market Price: Ship owners may base their rates on the current market price for freight.
Fuel Costs for Shipping
Fuel is one of the most significant expenses for shipping companies. Variations in fuel costs can impact the overall price of shipping.
Sea freight remains an affordable and effective method of transporting goods internationally, especially for bulk and large shipments. However, understanding the associated costs and managing logistics is critical to ensuring efficiency and minimizing unexpected expenses.