Ocean freight invoices have a tendency to cause confusion for experienced and inexperienced shippers alike. Because the industry is steeped in history and tradition (and jargon!), understanding exactly what you’ve been charged for can feel like a mystery—until now.
In this article, we’ll walk you through the most common charges you’ll see on your ocean freight invoice. By understanding these line items, you’ll get a better handle on the real cost of shipping your goods. Additionally, we hope that clearing up the confusion will build your confidence with this shipping method so you can continue to capitalize on opportunities as they arise.
Depending on your origin, your destination and the services you request, you’ll encounter different charges. To make it easy to identify the ones that apply to your business, we’ve grouped the common charges you’ll see into route segments.
Ocean Freight Charges from Door to Terminal
To kick off the ocean freight process, your goods need to move to a terminal so they can get loaded onto a ship. The charge for that transportation will appear on your invoice as the following:
Drayage – A shipping term that simply means moving freight short distances via truck.
Quick History Lesson: Shippers formerly used a particular type of horse-drawn cart that was referred to as a “dray.” (Think: The Budweiser Clydesdales’ wagon.) Because the horses that pulled drays could only physically move their load so far, “drayage” became the standard term for moving goods over short distances.
You’ll see a drayage charge for every movement your shipment has to make by truck. If your goods travel by train at any point, you may see a drayage charge for delivery to the railway station, then from the railway station to the terminal.
Along with your drayage charge, you may also see the following line item on your invoice:
Fuel Surcharge – A charge shipping companies use to account for the fluctuating cost of fuel.
Because fuel costs change constantly, it’s impossible for carriers to set truly fixed rates for drayage. As a result, the industry developed this surcharge which allows them to compensate for current fuel costs.
Note: Fuel surcharges are, in part, based on an average fuel price reported by the government, which changes weekly. That’s why a quote from your forwarder is only valid for a specified amount of time.
Finally, if you ship through certain ports, you may also see this item on your invoice:
Clean Truck Fee – A charge instituted by trucking companies to recoup costs incurred by the Clean Air Action Plan (CAAP).
The ports of Long Beach and Los Angeles instituted the CAAP in an effort to reduce pollution. One of its provisions included banning trucks with engines manufactured in 2006 and earlier.
Although the port fee associated with this regulation has gone away, many of the trucking companies still charge a fee as part of their effort to recoup the cost of purchasing compliant trucks for port deliveries.
Ocean Freight Charges at the Origin Terminal
No matter its origin, once your shipment arrives at the terminal, there are a number of charges that will come into effect:
Terminal Handling Charge – An ocean-freight-only charge assessed by the terminal to cover costs related to accessing the terminal, maintaining and using the equipment for handling containers and labor to operate that equipment.
This charge is what’s known as a pass-through charge. It’s levied by the terminal for using its facilities and passed through to you by your freight forwarder.
Your terminal handling charge is calculated on the volume of your shipment in cubic feet. (For more on how to calculate the volume of your shipment, see our article on 6 surprising things you might not know about ocean freight.)
You’ll also see a second charge on your invoice that’s also calculated by the volume of your shipment.
Wharfage – A fee charged by the freight terminal solely to cover the use of the wharf to load or unload cargo.
Like the terminal handling charge, wharfage is also a pass-through charge that your forwarder is simply handing over without adding any extra on top.
Ocean Freight Charges in Transit
Once your shipment passes through the terminal and gets loaded onboard the ship, a new set of charges come into play.
The first and most obvious is the main charge you probably think of when it comes to ocean freight:
Ocean Freight – The charge from the shipping line to carry your goods by ship from port to port.
As with the terminal handling and wharfage charges, your ocean freight charge is calculated on the volume of your shipment in cubic feet.
You’ll also see an accompanying fuel surcharge from the ocean freight carrier:
Ocean Fuel Surcharge – A surcharge used by a shipping line to offset the changing costs of their fuel. May appear as a “Bunker Fuel Surcharge” or a “Bunker Adjustment Factor” on some invoices.
Bunker fuel is a term that refers to the fuel oil that powers ships. It’s difficult to store and transport, and it’s not as readily available as other types of fuel. Additionally, the bunker fuel market is also undergoing a significant transformation. Regulations from the International Maritime Organization require shipping lines to move to low-sulfur fuels by January 1, 2020.
The bottom line for you: Expect bunker fuel surcharge fluctuations in the coming months as the shipping lines prepare to meet these new guidelines. Additionally, if you sit on a quote from your freight forwarder, your cost is likely to change as the surcharge fluctuates.
Ocean Freight Charges for International Destinations
If you happen to be moving your goods internationally, you’ll encounter a few additional charges on your invoice:
Customs Clearance Fee – A fee paid to your customs broker for arranging your customs clearance.
This fee may include customs duties, value-added tax (VAT), or these charges may be broken out for you separately.
Fumigation Charges / Invasive Species – Depending on the destination country, your shipment may need to be fumigated or inspected for invasive species. If that’s the case, you’ll see a charge like this on your invoice.
Note: Even though it’s a U.S. territory, you’ll encounter an Invasive Species charge on items you import into Guam. The territory deposits this fee into the Guam Invasive Species Fund, which is intended for quarantining and eradicating invasive species in marine commercial shipments.
Ocean Freight Charges at the Destination Terminal
In certain situations, you may encounter a few extra charges at the destination terminal before your shipment is delivered, such as:
Warehousing – A storage fee assessed when your shipment isn’t picked up or delivered within the free period negotiated with your carrier.
Within every shipment, you are given a certain grace period to arrange for the delivery of your goods. This is called “free time” or a “free period.”
So, if you’re not ready to take possession of your shipment when it arrives, your forwarder can hold onto it for you. However, if you’ve gone past your free time, you’ll be charged a warehousing fee on your invoice.
Along with that warehousing fee, you’ll likely also see the following line item for holding on to your container longer than expected:
Demurrage – A charge incurred for keeping your container past the free period when your container is still full and under the control of your carrier.
However, If all goes as planned with your shipment, it’s likely that neither of these charges will appear on your invoice.
Ocean Freight Charges from Destination Terminal to Door (and Beyond!)
Finally, if you opt to have your shipment delivered to its final destination, as opposed to picking it up at the terminal, you’ll see a final charge on your invoice for:
Drayage (or Delivery) – A charge for short-haul trucking to your final destination.
Like drayage at the origin, drayage to your final destination may also be subject to a fuel surcharge.
Now, there’s one more charge you may see on your invoice if you keep your container longer than expected. It’s similar to demurrage, but there’s one big difference:
Detention – A charge incurred when the container is under your control and has not been returned.
For example, perhaps you had the container delivered to your warehouse, and you’re not able to unload it immediately. As a result, you need to keep your container beyond your free period. If that’s the case, you will see a detention charge on your invoice.
Understanding Your Final Invoice—and Your Costs
Now that you understand the most common charges you’ll see on your ocean freight invoice, you’re better positioned to calculate the true cost of shipping your goods. Additionally, this knowledge will set you up to conduct business with confidence, offering you an advantage as you continue to leverage ocean freight to move your goods.
If you’d like further assistance understanding your ocean freight invoice and navigating costs, reach out to us. One of our experts would be happy to help you find the most cost-effective shipping solutions that meet your budget.