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Freight Knowledge Centre

Resources and FAQs on freight forwarding for logistics and supply chain professionals

Freight Knowledge Centre - Resources and FAQ's on freight forwarding for logistics and supply chain professionals

What is the difference between LCL and FCL?

FCL or Full Container Load is a standard set by the ISO (International Organisation for Standardisation) which refers to one 20 or 40ft container filled with cargo.

LCL or Less than Container Load refers to a shipment that doesn't fill one 20 or 40ft standard container.

What is IHC?

The term  IHC - Inland Haulage Charges means, the transportation charges to and from inland Container Depot/ Freight Station to sea port of loading or vice versa.

If the Cargo Freight Station (CFS) or Inland Container Depot (ICD) is away from the sea port of loading, the shipper completes customs formalities at the Inland Container Depot/ Freight Station and arranges to move the cargo to the port of loading either by rail or road. If Cargo Freight Station (CFS) or Inland Container Depot (ICD) is away from the sea port of discharge, the consignee completes customs formalities at the Inland Container Depot/ Freight Station and arranges to move cargo from port of discharge either by rail or road. Normally, most cargo in such locations is moved by rail. If moved by rail, the charges of moving goods from such location to Port of Loading/ Discharge is known as Inland Haulage Charges.

Inland haulage charges vary as per location, depending on the distances and other cost parameters. Inland Haulage Charges or IHC are collected by the carrier while releasing Bill of Lading for Export shipments, and when issuing Delivery Order in case of Import shipments.

What is NVOCC?

A Non-Vessel Operating Common Carrier (NVOCC) is an ocean carrier that transports goods under its own House Bill of Lading, or an equivalent document, without operating ocean transportation vessels. In certain circumstances, a NVOCC may also operate as a freight forwarder.

What is the difference between NCOVV and Carrier?

Let us take a closer look at what they both do to fully understand the difference -  Carriers or Freight Forwarders offer knowledgeable advice and a broad range of consultancy services that include customs documentation and clearing, warehousing, booking cargo with carriers, and more.

A NVOCC provides actual ocean carrier services usually under their own bill of lading.  They act as the shipper to the carrier and the carrier to the shipper. However, most of their services are related to ocean shipping.

So, a  Carrier or freight forwarder may not be a NVOCC, but an NVOCC may also be a freight forwarder. In many cases, a NVOCC can own and operate their own containers while freight forwarders may not.

How are detention and demurrage charges calculated?

The calculation is best demonstrated by example.

Scenario: A container is discharged off a ship on the 2nd July; Consignee takes release of the cargo from the port on 12th July and returns the empty to the nominated depot on the 19th of July.

  • Demurrage free days offered by the shipping line = 7 days
  • Detention free days offered by the shipping line = 10 days
  • Free days at port = 3 days

Demurrage calculation example:

As per above dates, on the 12th July, the box would have been sitting in the port/terminal for a total of 11 days. As per above scenario, line free days for demurrage will expire on the 8th of July.
11 days dwell time – 7 free days = 4 days that the box has overstayed its welcome in the port/terminal.

So, the line will be eligible to charge the consignee DEMURRAGE for 4 days from 9th to 12th July at a rate fixed by the line.

Detention calculation example:

The full container moves out of port on the 12th, the customer returns empty only on the 19th of July.
Detention free days = 10 days so this is valid till the 21st of July, but since the customer returned the empty on the 19th of July,
DETENTION  charges do not apply.

How to determine Ocean Freight?

Most businesses globally rely on ocean freight to get their products to international markets. But third party logistics providers, freight forwarders, and others in the logistics field understand the variable levies which are imposed on international trade shipments. As a business with a significant stake in the process, understanding how ocean freight rates are determined can have a huge impact on the final cost of your products. Here are some factors that influence ocean freight rates:

    Bunker Fluctuations
  • Seasons
  • Service Charges and Fees
  • Fluctuations in Currency
  • Container Capacity
  • AFP Global Logistics

Shipping Line charges - Are they the same at all ports?

A Terminal Handling Charge (THC) is charged by both the load port and discharge port for loading and discharging the cargo from the ship. The shipping line or their agent, in turn, will bill these charges to the shipper/consignee.

What are the taxes applicable on Ocean Freight?

One of the more complicated aspects of international shipping is having to deal with taxes. Regardless of where or what you are shipping, taxes will always be a point of consideration and shouldn’t be taken lightly.
There are two main valuation methods (also known as Incoterms):
1. CIF Price Calculation (Cost, Insurance and Freight)
CIF = Total cost of a product right up to delivery
Duty = duty % x (product price + cost of shipping + cost of insurance)
CIF is a pricing term that means the cost of the goods, insurance and freight (shipping charge) are included in the quoted price.
2. FOB (Free on Board) Duty = duty % x product price
FOB value is the price paid for the goods plus the cost of transportation, loading, unloading, handling, insurance, and associated costs incidental to delivery of the goods at the port or place of export in the country of export.
Example Import-Export Cost Calculation:

  1. Calculating the customs value

    The customs value in USA is FOB: $800 - Product price

  2. Calculate the import taxes

    Sales tax = $800 x 8% = $64
    Import duty = $800 x 4.4% = $35.20

  3. Calculate Merchandise Processing Fee

    (also called Courier Handling fee)
    Imports by courier of a value under $2,500 pay a MPF of $1

  4. Total calculation of import duty and taxes (landed cost formula)

    + $64 + $35.20 + $ 1.00
    = $100.20
    The total landed cost equals $1,110.20

Other common taxes charged by customs include:

  • Excise duty (usually levied on alcohol, tobacco and fuel products)
  • Consumption tax on luxury goods
  • Environmental tax
  • Clearance/entry fees

Courier Handling fees may include:

  • Customs clearance fee, or customs handling fee for processing the import declaration
  • Advancement fee for paying the duty and VAT on behalf of the recipient
  • Airline handling fee for loading and unloading the goods
  • Security fee for screening or x-raying the goods

Finally let’s look at De Minimis rules, and what they mean.
The Duty or Tax Free Amount known as ‘de minimis value’ is a country-specific value below which duty and tax is exempted.
Now the de minimis value is typically different for duties and taxes.
Some countries also use a simplified process for customs clearance, based on imports being below the de minimis value.
Below is a table of de minimis values for common shipping destinations.

Country De minimis value
JAPANJPY 10,000 (CIF value) or JPY 100 (Duty and consumption tax)

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