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Ocean Freight

Ocean Freight

If you want to use the simplest and the most common mode of transport to import and export your goods, you must choose Ocean freight. It is considered as one of the most common modes of transport that usually all the importers and exporters use. It has been now so common in the export import market, that more than 90% of everything is shipped only by ocean freight or sea freight. Though there are other international modes available as well like courier, standard air freight, express air freight etc. which are all faster mode of transport but on the other hand, they cost you double than ocean and sea freight. These types of modes are usually used to ship small products that have high value.

The word ocean itself depicts that this type of mode is going to ship products via ocean, which definitely takes time to reach. Now if ocean freight is a slow mode but air freight is again expensive, so where do we go? Some freight forwarders have invented a new service called expedited freight. Now this service becomes a neutral one, it is as quick as air freight but definitely would cost more than ocean freight. It works like ocean freight but with better ocean services and premium truck services.

Advantages

  1. Cost effective: Transporting heavy and bulky goods in big containers via shipping turns out to be very cost effective forms of transport and is considered an important supply chain management and operations within a business. Not only this but, it can also help us in keeping the price of goods competitive for the end customers.
  2. Heavy goods: Usually when it comes to import export of goods, importers and exporters have got material or products which are quite heavy in weight. So for that, shipping via goods turns out to be the best mode of transporting these heavy goods.
  3. Environment friendly: As we all know that protecting the environment is also considered as one of the most important areas which every businessman needs to take care of. Ocean freight is also an environmentally friendly mode of transport for cargo, this helps in boosting up the companies too.

Why to choose ocean freight over other shipping methods?

  1. Capacity and value: Each container has the capacity to hold 10,000 beer bottles! And ocean freight is quite cheaper when we talk about the rates. According to the export import business, any shipment that weighs 500 kg or more will cost you a lot and will be very expensive if we do the shipping via air freight.
  2. Lack of restrictions: Some organisations like international law, national law, carrier organisations are those who has got to play a very important part in shipping processes. They define what goods or products are dangerous to ship via transport. Generally, you will see that the quantity of products to get restrictions in ocean freight is quite less than air freight.

Lcl or Fcl (container)

Ocean and sea freight has got two other options:

  • fcl – full container load and
  • lcl- less than container load.

As the name suggests less container, in Lcl there are several other shipments that have to be packed into one container. It creates more work for the exporter, more of paperwork is involved and of course more labour work is involved. Thus Lcl has got three demerits. First, Lcl takes more time than Fcl does. Second, the chances of the products getting misplaced, damages are more in Lcl. Third, Lcl costs double per cubic metre than Fcl.

Now this becomes very obvious that shipping charges are quite low in Fcl than Lcl and it is very rational to use Fcl when you have to ship a huge amount of products. Thus the exporters prefer to use Fcl over Lcl in most of the situations.

Types of ocean freight

There are basically four types of ocean freight which everyone must know about. Below are their definitions explained and let us know from where the goods are dispatched from and to.

  1. EXW or Exworks: In this type of shipping the supplier has to transfer the goods directly into the factory or the manufacturer.
  2. FOB or free on board: Here the delivery reaches either to the port or terminal in the country itself.
  3. CIF or cost, insurance freight: This type of shipping covers transport to the buyer’s country.
  4. DAP/DDU or delivery at port/delivery and duty unpaid: This shipping works according to the ease of the importer without applying the cost of the tariffs.

What not to ship with sea freight

Following are the goods that cannot get transferred via ship:

  • Air bags
  • Ammunition
  • Explosives
  • Gasoline

Cost of ocean and sea freight

It is very general and obvious thing to know that when you import or export any good from other countries via any mode of transport, you have to bear with n number of tariffs and costs. The costing depends upon the agreement you are making with your supplier and make sure you know what type of ocean freight you are choosing, it leads to the clearance between yourself and the supplier.

Fees includes:

  • LCL or FCL fees
  • Transportation to Port of Loading
  • Export customs declaration
  • Loading port fees
  • Ocean freight charge
  • Insurance
  • Destination port fees
  • Import customs clearance
  • Customs duty/tax
  • Transportation from the Port of Destination
  • Destination country customs related fee (Duty/Tax)
  • Destination port/terminal handling fee (THC)
  • Destination agent service fee (D/O)

How are goods shipped?

The first thing first is loading of the goods in the containers and then they are shipped. Though there are many types of container but we have only three for you that are explained below:

  • 20’GP = 20’DV = 20FT = 20′ = 20 feet general purpose
  • 40’GP = 40’DV = 40FT = 40′ = 40 feet general purpose
  • 40’HC = 40’HQ = 40 feet high cube.

If you want to ship the goods in a bulky quantity and in one container or the goods are in liquid form or fragile, then you should definitely choose Fcl. After choosing the container type, the containers and goods are then sent to the container’s yard for consolidation and loading on to ship.

When to choose sea freight shipping

We just discussed above that Sea freight shipping is cost-effective if you want to import goods in bulk amount overseas. Most of the buyers and sellers find sea freight as the cheapest shipping method. People buying their stock from other countries find sea freight as one of the cheapest methods. One thing that you must keep in mind is that sea freight takes longer to ship and you should choose this method when you have enough time.

What affects ocean freight rates?

Ocean freight is considered as the cheapest method of shipping when you want to ship the products above 200kgs. But the problem arises when it comes to calculation as it includes n number of variables which keeps on changing over a period of time. There are four factors that affect the rates.

  1. Fuel: Fuel prices are never stable and they keep on changing over time and they are also associated with the cost of bunker fuel. This becomes the most crucial factor when it comes to deciding the freight charges.
  2. Currency: Even the currency rates keep on bouncing over a period of time and thus it also puts a significant effect on the charges.
  3. Season: Change in the season is also associated with the demands of goods which affect the prices. Fluctuation in demand and supply make some commodities expensive and other commodities cheaper.
  4. Capacity: When the capacity of the goods like gasoline, steel and natural oil increases, the price automatically increases. The other factor when the value rises is when the demand is higher than the supply in the market.