What is Ocean Freight?

Ocean freight (or sea freight) is the most common form of transport for importers and exporters, accounting for 90% of goods transported globally. Shipping by ocean freight can get a bit complicated from Bills of Lading to Incoterms, and Container Ships to Insurance.

What are the advantages of ocean freight?

  • Cost-Effective – transporting containers of goods by ship is one of the most cost-effective forms of transport, which is important supply chain management and operations within a business and can help keep the price of goods competitive for the end customers
  • Heavy goods – for items that are big or heavy, shipping might be the only way to get goods overseas, as airlines can restrict form of transport and shipping ports generally have large storage capabilities
  • Environmentally Friendly – ocean freight is the most environmentally friendly form of transport for cargo, which can help boost the company’s brand and reputation

Types of Ocean Freight

There are four major types of shipping terms that you should know about, also known as Incoterms (International Commerce Terms), which set out clear definitions for where the goods are dispatched from and to.

  • EXW, or ExWorks means the supplier transports the goods to the factory or manufacturer.
  • FOB, or Free on Board, which delivers to the port or terminal in the country of the supplier.
  • CIF, or Cost, Insurance and Freight, which covers transport to the buyer’s country
  • DAP/ DDU, or Delivery at Port / Delivery and Duty, Unpaid, which delivers all the way to your facility or warehouse, excluding the cost of tariffs and taxes

There are a number of ways in which sea freight can be transported.

  • FCL or Full container load, in which you purchase one or more full containers to send on a ship.
  • LCL or Less than container load, where your products share a container as you may not have a full container’s worth. Once they reach their destination, the container’s contents are divided once more.
  • RORO or Roll-on roll-off, where your products do not leave the vehicle they are in to go onto the cargo ship. The vehicle simply drives onto the ship and then drives off the other end.
  • Dry bulk shipping is used for some specific items, which are deposited into the hold of the ship instead of traveling in a container.

What is the cost of ocean and sea freight?

There are numerous tariffs and costs to consider when having goods shipped or importing goods from overseas. It depends on the agreement with your supplier – will they just be delivering to their port, your terminal, your warehouse? Be sure to know which incoterm relates to your shipping contract, so that the responsibility between yourself and the supplier is clear.

Fees include, but aren’t limited to:

  • 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 (i.e. Duty/Tax)
  • Destination port/terminal handling fee (i.e. THC)
  • Destination agent service fee （i.e. D/O)

Bill of Lading and Shipping

Shipping goods also require a Bill of Lading (BL), for sea freight, these are called Seaway or Ocean Bills of Lading. A Bill of Lading lists the cargo that will be loaded or carried on a ship, given to the consignee of the goods. A Bill of Lading can act as a receipt that goods are loaded, a form of contract to demonstrate that goods are being shipped, and a document to the title of goods.