Settlement of ocean freight-related charges

In addition to the "pure" ocean freight, there are various surcharges. Some of these are levied by the shipping line, some by the port of loading/destination terminal, and others are fees created by the freight forwarder themselves. Moreover, many charges lack clear standards and are highly flexible. Besides being collected from the shipper, some fees may also be charged to the consignee. This easily creates two pitfalls: first, certain forwarders invent charges to overcharge; second, forwarders may adjust and shift some costs between the consignee and the shipper. 

Generally, when the shipper appoints the freight forwarder, the shipper is the client. The forwarder will try to keep costs low to please the shipper, thus charging less, while overcharging the customer (consignee) at the destination port—robbing Peter to pay Paul, and vice versa. This is why, for the same shipment, if it is under CIF terms and we choose our own forwarder, the costs are relatively low; whereas under FOB terms with a forwarder nominated by the customer, the local currency surcharges are much higher. 

Knowing these inside details, we can understand that we shouldn't be tempted by short-term bargains, thinking the lower the price the better. Instead, we must clarify the cost breakdown upfront to avoid unscrupulous forwarders adding arbitrary charges after shipment or passing costs onto customers, which could harm our relationships and cooperation with them. 

First of all, we ourselves need to have a certain understanding of the composition of freight and surcharges, and learn to distinguish between standard industry charges and arbitrary fees. 

Common surcharges include: 

\n\t
1. \n\t
   ORC: Origin Receiving Charge; 
   \n\t
\n\t
2. \n\t
   DDC: Destination Delivery Charge; 
   \n\t
\n\t
3. \n\t
   THC: Terminal Handling Charge; 
   \n\t
\n\t
4. \n\t
   BAF: Bunker Adjustment Factor, also known as FAF (Fuel Adjustment Factor); 
   \n\t
\n\t
5. \n\t
   CAF: Currency Adjustment Factor; 
   \n\t
\n\t
6. \n\t
   DOC: Document Fee; 
   \n\t
\n\t
7. \n\t
   PSS: Peak Season Surcharge; 
   \n\t
\n\t
8. \n\t
   AMS: America Manifest System. 
   \n\t
\n

CIC stands for Container Imbalance Charge. In Chinese, it means "container imbalance surcharge," and some also translate it as "equipment management fee." The main reasons for this CIC charge are as follows:

1. Seasonal fluctuations in cargo transport on global liner routes lead to cargo volume imbalances: Western countries typically experience a slack season for cargo transport at the beginning of the year, with container volumes gradually rising around April and May as trade volumes increase, followed by another small peak in trade before Christmas.

2. Trade imbalances between countries or regions at both ends of a route: East Asian countries like China export far more goods to Europe than they import from Europe, and a similarly significant issue exists on the Far East-North America route.

3. Differences in the types and nature of import and export goods, as well as varying freight rates and handling charges, also contribute to the imbalance of import and export containers.

In fact, the CIC charge is another arbitrary fee following the EBS charge. Currently, the liner services for China's exports are controlled by various shipping alliances. To maximize profits, these shipping companies continuously impose additional surcharges. Chinese exporters, being in a relatively weak position, have no choice but to accept these unreasonable price adjustments from the shipping lines.

EBS stands for Emergency Bunker Surcharge. This surcharge is generally implemented when international crude oil prices continue to rise beyond what carriers can absorb. In a weak market where increasing ocean freight rates is not feasible, carriers introduce this charge to mitigate cost losses.

How much is EBS typically charged? EBS is only a temporary surcharge and generally does not last long. Moreover, EBS charges vary depending on the period and the destination region. 

Do FOB shipments need to pay EBS charges? The answer is no. EBS is a surcharge on ocean freight and is not part of FOB local charges, so customers shipping under FOB terms do not need to pay EBS. However, some shipping lines, unable to collect this charge from the consignee, have shifted the EBS cost onto FOB customers. If a customer encounters a shipping line or freight forwarder demanding EBS payment, they should try to negotiate with their client and request that the client bear this cost. 

Regarding LOCAL CHARGE, it includes the following items (specific charges are for reference only and have no practical significance): 

\n\t
1. \n\t
   Booking Fee: Generally RMB290/20', RMB420/40'GP/HQ.
   \n\t
\n\t
2. \n\t
   Customs Declaration Fee: RMB100-120 per declaration (if one shipment involves N companies, the total customs fee is 100N; additionally, if there are more than 5 product names, an extra charge applies for every additional 5, which is what we pay to the customs broker, i.e., RMB30 per additional 5 product names).
   \n\t
\n\t
3. \n\t
   THC: RMB370/20', RMB560/40'GP/40'HQ (paid to the port terminal).
   \n\t
\t
4. \n\t
   Documentation Fee: (Charged by the shipping line at RMB115/BILL).
   \n\t
\n\t
5. \n\t
   Handling Fee: RMB150-200 (Generally applicable to collect shipments, not prepaid shipments). 
   \n\t
\n\t
6. \n\t
   AMS: USD25/RMB210 (USA and Canada routes).
   \n\t
\n\t
7. \n\t
   Trucking Fee (depending on the specific location): There are also specific rules regarding the container pickup period. Generally, for Phase 4 pickup (e.g., Yong**/An**), an additional RMB100/CONTAINER applies; for delivery to Phase 4 or Phase 5 terminals, an additional RMB200/CONTAINER applies.
   \n\t
\n

LOCAL CHARGE, literally translated, means "local charges." It generally refers to fees incurred in the "destination country" other than the international air or ocean freight. These include: customs clearance fees, inspection and quarantine fees, documentation fees, security screening fees, storage fees, warehousing fees, and door pickup/delivery fees, among others. However, customs duties and taxes in the "destination country" are generally not included.

Under commonly used FOB and CIF terms, LOCAL CHARGE generally does not arise for Chinese import and export enterprises.

For export under CIF, LOCAL CHARGE is borne by the consignee in the destination country.

For import under FOB, LOCAL CHARGE is borne by the shipper in the destination country.

LOCAL CHARGE only arises for shipments involving door transportation, such as door-to-door, port-to-door, or door-to-port shipments.

For example: Import under EXW, ex-factory pickup. The LOCAL CHARGE incurred from pickup at the manufacturer in the destination country until the cargo is dispatched must be borne by the importer in China.

For export under DDU or DDP, where charges are paid to the named destination, the LOCAL CHARGE incurred from the arrival of goods at the port in the destination country until delivery to the consignee's designated location must be borne by the exporter in China.

01. Ex Works (EXW):       

02. Free on Board (FOB):   

03. CIF (Cost + Insurance + Freight):   

04. Cost and Freight (CFR = Cost + Freight):   

Import formalities: Buyer's responsibility.