In daily sea freight inquiries, we often encounter surcharges such as LSS, EBS, and BAF. These surcharges are numerous and changeable. Importantly, some surcharges are not low, which invisibly increases transportation costs. Today, let's reveal various surcharges imposed by shipping companies.
I. What Exactly Are Surcharges?
Simply put, sea freight surcharges are various fees charged by shipping companies on top of the basic ocean freight to compensate for additional costs or losses caused by factors related to the vessel, cargo, port, or other circumstances.
II. Why Do Surcharges Exist?
The emergence of surcharges mainly stems from the dynamic and complex nature of the shipping market:
Cost Fluctuations: Factors like oil prices and exchange rates change at any time; fixed freight rates cannot cover all risks.
Special Circumstances: Certain ports, seasons, or cargoes generate additional operational costs.
Market Mechanisms: When supply and demand change, shipping companies use surcharges to adjust space demand.
III. Comprehensive Analysis of Common Surcharges
1. Surcharges Related to Fuel and Currency Adjustment (Cost Fluctuations)
(1) Bunker Adjustment Factor (BAF / FAF)
This is the most common type of sea freight surcharge and also the largest, typically accounting for 30%-50% of the sea freight. BAF is adjusted based on changes in international crude oil prices. The higher the crude oil price, the higher the BAF, and vice versa.
(2) Low Sulphur Fuel Surcharge (LSS)
This surcharge is established to compensate for the additional costs incurred by using low-sulphur fuel oil when vessels are in Sulphur Emission Control Areas.
This surcharge arises from strict standards issued by the International Maritime Organization and the international shipping industry to support global energy conservation and emission reduction. These standards strictly control the amount of sulphides in fuel emissions, requiring vessels to use fuel with lower sulphur content in specific areas or use exhaust gas cleaning systems to meet environmental requirements.
(3) Emergency Bunker Surcharge (EBS/EBA)
Why it's charged: Generally, when international crude oil prices rise rapidly, and it's inconvenient for shipping companies to increase ocean freight in time, this temporary fee is charged to cover costs.
Characteristics: EBS is typically used for Australia routes, while EBA is generally used for Africa routes and Central/South America routes.
(4) Fuel Adjustment Factor (FAF)
When fuel price increases cause vessel fuel expenses to exceed the original fuel costs in the transport budget, shipping companies add this surcharge to compensate for the increased fuel expenses without adjusting the original freight rate.
(5) Currency Adjustment Factor (CAF)
If the shipowner suffers a loss of revenue due to the depreciation of the billing currency, the shipowner may impose a CAF to pass this loss onto the shipper. It is generally calculated as a percentage of the basic freight.
(6) Yen Appreciation Surcharge (YAS)
In international trade, this covers additional costs caused by the rising yen exchange rate. YAS is usually temporary; when the yen exchange rate falls, freight companies may suspend or cancel YAS. YAS is mainly used for Japan routes.
2. Port/Route Related Surcharges
(1) Port Congestion Surcharge (PCS)
What it is: Charged due to significant delays caused by severe congestion at the destination port.
Common ports: In recent years, ports like Lagos (Nigeria), Los Angeles/Long Beach (USA) have been common.
Why it's charged: Congestion increases vessel waiting time and port call costs.
(2) International Ship and Port Facility Security (ISPS)
This is mainly to fulfill security conventions in the international maritime field. To meet the security requirements of these international conventions, port operators need to invest significant funds in security facilities, personnel training, etc., leading to substantially higher operating and management costs.
(3) Destination Delivery Charge (DDC)
Commonly used on US and Canada routes. Charged when special circumstances at the destination port increase unloading operational costs. For example, overweight, over-length, dangerous goods requiring special unloading equipment or slower procedures generate more costs.
(4) IAC (Direct Additional Surcharge), used on US/Canada routes
Charged when a vessel directly calls at a non-base port or secondary port. If your consignee requires direct shipment to a non-base port (e.g., a small inland or feeder port), the shipping company must arrange a special deviation from the regular route.
(5) Transhipment Surcharge
Costs incurred when cargo needs to be discharged from one vessel at an intermediate port and loaded onto another vessel to reach the final destination. For example, when the destination port is not a direct port of call on a main route, the shipping company arranges a transhipment hub (e.g., Singapore, Busan), where cargo is discharged from the mother vessel and loaded onto a feeder vessel. The additional handling, storage, and operational costs at the transhipment port constitute this surcharge.
(6) Deviation Surcharge
Additional costs incurred when a vessel temporarily changes its planned route and detours. For example, detouring due to severe weather, war zones, or political instability. Deviations significantly increase fuel and time costs, and this extra expense is recovered via this surcharge.
(7) Alteration of Destination Charge
Charged when the shipper requests a change to the originally specified discharge port, and authorities (e.g., Customs) permit it, and the shipping line agrees.
(8) Optional Surcharge
Charged when the shipper cannot determine the exact discharge port at the time of shipment and requests to choose between two or more pre-specified ports for unloading.
(9) Suez Canal Surcharge (SCS)
A surcharge charged by shipping companies to compensate for the transit fees paid to the Suez Canal Authority when passing through the Suez Canal.
(10) Panama Canal Transit Fee (PTF)
A surcharge charged by shipping companies to compensate for the transit fees paid to the Panama Canal Authority when passing through the Panama Canal.
3. Cargo Characteristic Surcharges
(1) Heavy-Lift Additional (HLA)
An additional charge applied when the gross weight of a single piece of cargo exceeds a specified limit (varies by shipping company, e.g., 2, 3, or 5 metric tons). HLA is calculated based on weight; the heavier the weight, the higher the charge. If transhipment is required, the surcharge applies each time the cargo is transhipped.
(2) Long Length Additional (LLA)
An additional charge applied when the length of a single piece of cargo exceeds a specified limit (e.g., 9 meters according to COSCO's Tariff No. 1).
(3) Surcharge of Bulky Cargo (SBC)
An additional charge applied when the gross weight, length, or volume of a single piece of cargo meets or exceeds the limits specified in the tariff.
(4) Over Weight Surcharge (OWS)
An additional charge levied by shipping companies on the consignor when the total gross weight of a single container (cargo weight + tare weight) exceeds the shipping company's free weight limit. This limit is the shipping line's rule, not the container's payload limit.
(5) Dangerous Goods Surcharge (DG Surcharge)
What it is: Charged for transporting dangerous goods.
Why it's charged: Dangerous goods require special storage, management, and handling.
4. Special Situation Surcharges
(1) Peak Season Surcharge (PSS)
What it is: Charged during peak transportation seasons.
When it's charged: Typically from August to December annually, especially after National Day (China) and before Christmas.
Why it's charged: Tight space availability and increased operational costs during peak season.
(2) General Rate Increase (GRI)
Generally used on South America and US routes. When shipping companies' transportation costs increase significantly due to various reasons (ports, vessels, fuel, cargo, etc.), they impose a GRI to compensate for these increased expenses.
(3) Temporary Additional Risks / War Risk Surcharge (TAR/WAS)
When unforeseen risks like war, armed conflict, political unrest, or piracy occur in areas along the route, to ensure vessel and cargo safety, shipping companies may take extra measures (e.g., hiring armed security, joining naval convoys, speeding through dangerous areas), all of which increase costs.
(4) Emergency Cost Recovery Surcharge (ECRS)
Charged in situations like adverse weather conditions causing significant increases in vessel transportation and operating costs.
5. Other Surcharges
(1) Terminal Handling Charge (THC)
What it is: Charges for terminal operations at the port of loading and port of discharge.
Why it's charged: To cover terminal operating costs like loading/unloading and storage.
Characteristics: Divided into origin THC and destination THC.
(2) Origin Receiving Charge (ORC)
What it is: A surcharge more common in South China.
Why it's charged: To cover origin terminal operations, documentation, etc.
Characteristics: Essentially similar to THC, just a different name and format.
(3) Documentation Fee (DOC)
Refers to fees for handling various documents in the shipping process, from booking notes to details on origin/destination, container size, cargo description, customs clearance, delivery, etc.
(4) Container Service Charge (CSC)
A fee for container or cargo unit service.
(5) Container Imbalance Charge (CIC)
This charge arises from imbalances in cargo flow and containers due to trade imbalances or seasonal changes. Shipping companies charge it to recover the costs of repositioning empty containers.
(6) Container Service Charge (CSC)
A fee charged for providing services like container maintenance, repair, cleaning, etc.
(7) Cleaning Charge (CC)
This fee is more common in bulk cargo transportation. It covers costs for cleaning and disinfecting holds before/after loading/discharging to ensure cargo quality and safety.
6. Country-Specific Surcharges
(1) Advance Commercial Information (ACI) – Canada
A Canada Customs regulation requiring all cargo destined for Canada or transhipped via Canada to be declared to Canada Customs 24 hours before loading, similar to the US AMS.
(2) Automated Manifest System (AMS) – USA
Used on US/Canada routes, specific to the US – All cargo destined for the US or transhipped via the US to other countries must undergo AMS declaration (24 hours before loading). AMS is also known as the 24-Hour Manifest System / US Anti-Terrorism Manifest System.
(3) Entry Summary Declaration (ENS) – EU
This is the advance manifest rule for EU customs. Since January 1, 2011, the EU has enforced "advance cargo declaration" rules for all cargo arriving at (imports) or passing through (transhipment, transit, ship's remaining cargo, etc.) EU ports, applying to all 28 EU member states (at the time) plus Norway, Switzerland, Turkey, etc.
(4) Advance Filing Rules (AFR) – Japan
For containerized cargo loaded on vessels planning to enter Japanese ports, shipping companies or NVOCCs must electronically submit manifest data for full container loads 24 hours before departure from the origin port to Japan Customs – i.e., Advance Filing Manifest.
Written by karla
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