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. A shipper uses up the space of the entire container.
LCL or Less than Container Load refers to a shipment that doesn’t fill one 20 or 40ft standard container. In the case of LCL, several shippers load their cargo into a single container. While LCL is the cheaper option for small shipments, it costs more money per unit of freight as compared to FCL.
What is IHC?
IHC stands for Inland Haulage Charges and refers to the transportation charge incurred due to transportation of containers from inland container freight station to the port of loading and vice versa. When the port of loading is away from the cargo freight station, the shipper has to make arrangements for moving the cargo from the freight station to the port either by road or rail. In this case, custom formalities are completed at the freight station.
If the goods are moved by rail, then Inland Haulage Charges refer to the charge of transporting goods from such location to the concerned seaport. IHC is collected by the shipping line when it generates the bill of lading for export shipments. In case of import orders, it’s released at the time of issuing a delivery order.
What is NVOCC?
An ocean carrier that moves cargo under its own House Bill of Lading or an equivalent document and does not operate the vessels by which ocean transportation is provided is called a Non-Vessel Operating Common Carrier (NVOCC).
What is the difference between NVOCC and freight forwarders?
|Freight forwarders provide consultancy services and help the shipper with customs-related documentation, booking space with carriers, arranging for other transportation services, warehousing, etc.||An NVOCC offers ocean carrier services and issues their bill of lading. Their services are related to ocean shipping and they act as the shipper to the carrier and the carrier to the shipper.|
|A freight forwarder may not be an NVOCC.||An NVOCC can also be a freight forwarder.|
|Freight forwarders usually don’t own or operate their containers.||In several cases, an NVOCC owns and operates its containers.|
|A shipper or an importer/a customer ‘appoints’ a freight forwarder to ‘act as their agent.’||A shipper or an importer/ a customer ’employs the services’ of an NVOCC as one of their ‘service providers’. It is crucial to note that the NVOCC is not an agent in this case but instead provides services as a carrier or those of a shipping line.|
What are detention and demurrage charges?
|Detention charges||Demurrage charges|
|Detention charges are levied by the shipping line to the importer when the importer takes a full container for unpacking and fails to return the empty container to the concerned empty depot before the permitted line free days expire.||Demurrage charges are levied by the shipping line to the importer when the importer fails to take delivery of a full container and move it out of the port premises for unpacking within the stipulated line free days.|
What are port free days and line-free days?
Port free days refers to the number of days for which a port allows the importer to keep the containers in the port area for free. Once the limit of port free days is exceeded, the port storage charges published in the port tariff are applied.
On the other hand, line-free days is the number of days the shipping line gives to the customer to pick up a full container, take it to their facility for unpacking and return the empty container to the concerned shipping line. After the line free days, the shipping line imposes a charge for every extra day taken by the customer to return the container.
How are detention and demurrage charges calculated?
Here is an example to demonstrate how detention and demurrage charges are calculated:
A container is discharged off a ship on the 5th of December; the concerned importer takes the release of the cargo from the port on 15th December. He returns the empty container to the concerned depot on 22nd December.
- 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
In this case, here’s how the demurrage charge will be calculated:
On the 15th of December, the container would have been in the port for a total of 11 days. In the above-mentioned scenario, line-free days for demurrage will expire on the 11th of December.
11 days dwell time – 7 free days = 4 days more than the allowed limit
Hence, the shipping line will charge the consignee a demurrage charge for 4 days from 12th to 15th December.
Here’s how detention charge will be calculated:
The full container moves out of port on the 15th and let’s assume that the consignee returns the empty container of on the 22nd of December.
- Detention free days = 10 days so the container can be returned till the 24th of December. But as the consignee returned the empty container on the 22nd of December, detention charges won’t be applied.
How to determine Ocean Freight Rates?
Majority of businesses across the globe rely on the ocean for moving their goods internationally. Ocean shipment is known to be a cheaper option as compared to air shipment. Here is a list of some of the factors that determine or influence the ocean freight rates:
- The ability of the shipper to negotiate rates with the freight forwarder/carrier
- Bunker fluctuations
- Service charges levied by the stakeholders involved
- Fluctuations in currency
- Costs involved in handling and clearing goods at the port of loading and port of destination.
- Whether a shipment requires a dedicated Full Container Loading (FCL) or it’s small enough to be consolidated with other cargo that is Less than Container Load (LCL)
What are port charges?
As the name implies port charges refer to the charges levied by port authorities on the containers it handles. Some of the port charges involved in container shipments are as follows:
Terminal Handling Charge (THC)
Terminal Handling Charge is levied by ports for loading and discharging of a container from the ship. It is charged by both the port of loading as well as the port of discharge. THC varies from port to port and terminal to terminal across the world. It is also paid to transhipment ports if there’s a transhipment along the route. However, for transhipment ports, THC is paid directly to the port by the shipping line. It is usually included in the ocean freight charges paid by the shipper to the shipping line in advance.
Early Arrival Charge
At times containers arrive at the port even before the stacks into which it is to be taken has opened, in this case, the port levies the early arrival charge. It is usually at the discretion of the port operator to decide whether or not to accept containers that arrive early.
Late Arrival Charge
At times containers arrive at the port after the stacks into which it is to be taken has been closed, in this case, the port levies the late arrival charge.
Sometimes situations arise under which the destination of a port gets changed or the ship in which it is to be sent gets changed or the container requires an inspection. In such cases, the container needs to be shifted around within the stacks and the charges levied on it are called shifting charges.
It refers to the charges levied by the port for cancelling or amending any document lodged with them.
What are the taxes applicable on Ocean Freight?
Shipping goods is quite a complex process and an integral part of this process is dealing with a wide range of taxes involved. Taxes are mandatory financial obligations levied by governing authorities on goods and services, income, etc.
Following is a list of some of the common taxes levied on goods:
- VAT – Value Added Tax
- Import Duty
- GST (Goods and Services Tax)
Other common taxes that are charged by customs include:
- Excise duty (usually levied on fuel, alcohol, tobacco)
- Environmental tax
- Consumption tax on luxury goods
- Clearance/entry fees
What is de minimis value?
The duty or tax-free amount is known as ‘de minimis value.’ It is a country-specific value and taxes are exempted below this value. The de minimis value usually differs for duties and taxes.
What is a shipping Bill?
Shipping goods from point A to point B involves several formalities. The shipping bill is a document issued by the Customs Service Center and is an important document that’s required to acquire clearance from the customs authorities. A shipper cannot load his goods unless he produces this document. Along with customs clearance and permission to load goods, the document also facilitates getting claim duty drawbacks.
What is the procedure for Shipping Bill generation?
The procedure for generating a Shipping Bill is as follows:
- The shipper has to register with the Customs with either their IEC code number or else their Custom House Agents (CHA) license number. He also needs to register the authorised dealer code number of the bank that will realise the export proceeds.
- Along with a copy of the packing list and freight invoice, a declaration in the standard format that is signed by the authorised CHA or the shipper himself has to be submitted at the service centre.
- Upon completion of the data entry process, the shipper gets a checklist that is generated through the process. The shipper is expected to verify the data and inform the service centre in case of any discrepancies.
- After verification, it gets processed automatically. In case the value of the goods being exported is more than Rs.10 lakhs or the drawback amount is more than one lakh or has samples that are free and worth Rs.20,000, then the document will be assessed by the Assistant Commissioner of exports.
- Once the processing is over, the shipper can track the status of the bill by coordinating with the service centre.
- The shipper/CHA needs to submit original documents including a packing list, invoice, etc. at the dock along with a checklist.
- After the officer in charge makes sure that everything is in order, he will issue a ‘Let export order,’ post which printout of the shipping bill is generated.
What is a Bill of Lading?
A bill of lading often abbreviated as BOL or B/L is one of the most crucial documents required while shipping goods. It acts as a legally binding ‘evidence’ of the contract between the shipper and carrier to transport goods from point A to B as per the sales contract agreed upon by the shipper and consignee.
It is issued by the carrier or their agent to acknowledge that the cargo has been received by them to be shipped from the origin port to the destination.
The information mentioned in this document has to be precise as it determines how the goods will be handled, billed, where they will go, etc. Mistakes in this document can directly affect the delivery of the freight.
What is an AWB and its purpose?
Also known as an Air Consignment Note, AWB or Airway Way Bill is a non-negotiable document that an air carrier issues to acknowledge that they’ve received a shipment. It acts as a receipt for the shipper.
What is a Bill of Entry?
The document indicates the destination address of the shipment and contact information of the consignee. An AWB serves a similar function to ocean bills of lading, however, an AWB is issued in non-negotiable form. That means there’s less protection with an AWB as against a bill of lading.
There are multiple copies of AWB and all stakeholders involved in getting the shipment from point A to B document it.
What is a Bill of Entry?
A bill of entry is a legally binding document filed on or before imported goods arrive by consignees or custom clearance agents.
The document is submitted as a part of the customs clearance procedure to the customs department. This submission allows the consignee to claim ITC on the concerned goods. Typically, the bill is issued either for bond clearance or home consumption.
On filing the bill of entry, an authorised customs officer examines the goods. Following which the consignee can clear the goods by paying the basic customs duty, IGST, and GST compensation cess.
What is HAWB?
House airwaybill or HAWB is one of the documents used while shipping goods by air. It is issued and signed by a freight forwarding agent and it serves as an evidence of the terms and conditions as specified by the freight forwarder for carrying the goods.
House airway Bill or HAWB: HAWB is issued by a freight forwarder on receipt of goods from the shipper agreeing to deliver goods at the destination.
What is an HBL?
A House Bill of Lading or HBL is a document generated by an Ocean Transport Intermediary (OTI) such as a non-vessel operating company (NVOCC) or a freight forwarder.
A HBL carries the name and address of the supplier who is responsible for delivering the shipment to the forwarder. It also has the details of the consignee to whom the freight forwarder delivers the shipment to.
It also includes detailed information about the items to be shipped and the value of the shipping contract.
What is the difference between HBL and MBL?
A bill of lading is issued as either a House Bill of Lading or a Master Bill of Lading.
A House Bill of lading or else HBL is issued by a freight forwarder or an NVOCC operator to their clients. Whereas, a Master Bill of Lading or MBL is issued by the carrier to the NVOCC operator or forwarder.
HBL vs. MBL:
|The shipper is usually the actual exporter of the cargo (or as dictated by the L/C)||The shipper is usually the freight forwarder or NVOC operator or their agent|
|The consignee is usually the actual importer of the cargo (or as dictated by the L/C)||The consignee is usually the office of the NVOCC operator or the freight forwarder or destination agent or counterpart|
|The notify could be the same as consignee (or any other party as dictated by the L/C)||The Notify could be the same as consignee or any other party|
What is the Cargo Booking Process?
- Check restrictions
- Select product and service
- Make booking
- Prepare cargo and paperwork
- Complete Air Waybill
- Drop cargo
- Track cargo
- Collect cargo
How to calculate Volumetric weight?
A stakeholder is a person or a group who has an interest in a given situation, and who is an active player. A stakeholder can also be considered as an actor, in the sense of a person or organization who carries out one or more of the activities in an import or export process.
|Importer||Exporter||Transport Service Supplier||Environment|
|Ship to||Ship from||Frieght Forwarder||Standards|
Why is having visibility over cargo movement necessary?
It gives you the ability to see real-time data for freight movements which enable transportation managers to stay a step ahead of any potential issues. For example, real-time visibility could allow a firm to see any loads that are running behind schedule and then make a proactive decision to try and do something about it.
What are the Freight Forwarder Payment terms?
- Cash against goods
- Cash against documents
- Cash in advance
- Letters of credit
What is Transshipment?
A transhipment occurs when there is no direct connection between two ports and the goods have to be stored at an intermediate destination before being shipped to the final destination. One possible reason for doing this is to change the means of transport during the journey, known as transloading.
If you have anything to do with the world of international trade, there is no avoiding the Incoterms. The freight industry is ruled by a voluntary yet authoritative set of rules known as the Incoterms.
The Incoterms were originally designed by the International Chamber of Commerce (ICC) in 1936 to abolish differences in trading practices and legal understandings among traders around the world. The International Commercial Terms (Incoterms) are a set of standards that determine the responsibilities of buyers and sellers for the safe delivery of goods by all modes of transport.
To put it simply, the Incoterms are the guidelines that both buyers and sellers abide by, upon undertaking international or domestic trade.
The areas covered by the Incoterms are:
- The obligations of each party i.e. the individual roles played by the sellers and buyers
- The expenses to be borne by the buyers and sellers
Every 10 years, the Incoterms are updated by the ICC and it is always advisable to refer to the latest version.
Importance of Incoterms in international trade.
To maintain uniformity in all trading operations, and avoid miscommunications, importers/exporters alike refer to the Incoterms for smooth sailing.
- The Incoterms are globally accepted and provide predictability to the business
- They guide sellers/buyers on how to conduct transactions and clarify any grey areas in the contract
- They provide clarity on all the updates and help the stakeholders to understand how they apply to global supply chains
List of Incoterms for your reference.
Some of the most commonly used Incoterms, off the top of our head, are:
- FCA (Free Carrier)
FCA shipping terms require the seller to load the goods on to the buyer’s transport within the premises of the seller. Often, the buyer hires the transport to pick up goods from the seller’s warehouse. The seller also clears the goods for export from the country of origin. After this point, all costs, risk and responsibility lie with the buyer.
- FAS (Free Alongside Ship)
FAS shipping terms provide well-defined instructions for the seller about the course of transportation till the port of destination. The buyer assumes responsibility for loading the goods and all related charges after the goods reach the agreed-upon port.
- CPT (Carriage Paid To)
CPT terms state that the seller bears the cost of transportation but is not responsible for insurance and the risk of goods is transferred to the buyer after the point of delivery.
- CIP (Carriage and Insurance Paid)
CIP terms apply to all modes of transport. This rule is similar to the CPT terms except that the seller is instructed to take responsibility for the carriage and insurance coverage till the port.
- DPU (Delivered At Place Unloaded)
DAT(Delivered at Terminal) was changed to DPU (Delivered at Place Unloaded) as part of the revisions of Incoterms 2020.
DPU shipping term states that the seller shoulders all of the responsibility up to and including unloading the goods at the named terminal/site at the destination port.
- DAP (Delivered at Place)
DAP terms state that the seller and buyer agree upon the destination. The cost of unloading at the agreed-upon place will be borne by the buyer.