29 June 2021 • 12 min read
Shipping fees Part II: Transport & insurance
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Know all incidental charges or extra costs in shipping. Find about these transport &insurance related extra ocean freights costs that can catch you off-guard
In Part I of this two-part guide on incidental charges in the shipping process, you read about freight-related and customs-related incidentals. In Part II, we take a look at two other stages of the shipping process where exporters and importers might run into unexpected expenses:
- Marine cargo Insurance
It might not be fully possible to anticipate these incidental charges. Even then, a certain amount of planning and budgeting goes a long way in saving yourself the trauma of a huge shipping cost.
Transport-related Incidental Charges
While shipping your cargo door-to-door, door-to-port or port-to-door, it is important to factor in the cost of ground transportation, some of which might go beyond the typical transportation charges you would encounter. Here are some common incidental charges related to inland transportation:
- Repositioning (REPO): When you have your nominated trucker pick up an empty container from the port and store it at your premises or at the carrier’s yard to avoid demurrage fees, it is called repositioning (REPO) or pre-pull. (Demurrage is the per-day charge a shipper pays for use of a container within a port beyond the allotted free demurrage time). A repositioning is usually done for cargo on a tight loading schedule. The shipper pays a repositioning fee, which is almost always lower than demurrage charges. Repositioning is also common when containers are not available at the port closest to your factory from where you intend to export your goods. So, you have the containers picked up from the next nearby port and then have the stuffed containers driven to the first port for export.
- Re-delivery: A re-delivery fee becomes a reality when a sudden situation forces your shipment to be returned to a location and be brought back at a later time or date. There could be many reasons for such a move. For example, your carrier fails to complete loading, so it has the trucker drive the container to a secure facility for overnight storage and then brought back the next day for loading to be completed.
- Chassis re-delivery: A chassis is another word for a trailer or undercarriage that is used to move containers. If the chassis is in a different location from the one where the container is being loaded or unloaded, the trucker charges a fee for delivering the chassis at the loading/unloading facility. This is called a chassis re-delivery fee.
- Extra container loading time: If the time taken to load/unload a container goes beyond the specified free time, then the trailer operation will charge a per-hour late fee. A common cause of delayed loading is weight instability due to incorrect stuffing, which means the shipper has to repeat the stuffing process.
- Destination unloading: Once the cargo reaches the destination warehouse, the trailer service provider or FTL service provider will charge a fee for unloading the goods from the container or unloading the container and loading it onto another truck. This is usually not part of the freight quote, so don’t forget to budget for it.
- Halting charge: Truckers will charge an hourly halting charge when they do not receive cargo within six hours of loading time at the loading site, or when the cargo isn’t unloaded within the allotted reporting time at the unloading site.
- ELD (US-only): Trucks in the US are equipped with Electronic Logging Devices (ELD), which automatically record driving time and the distance driven. They were introduced to help implement a federal law that restricts truckers to a specific number of driving hours in a day. An ELD overnight fee comes into play when your trucker reaches the stipulated driving time limit before delivering your container and is forced to stop and rest for the night.
- Container damage charge: Damage to containers during transport (due to a road accident, improper packing/stowing, loading/unloading accidents, etc) can lead to the shipper paying damages to the container owner. Checking containers before use and taking photographs as evidence can help you avoid paying these charges if the fault doesn’t lie with you.
Marine Cargo Insurance-related Incidental Charges
With hundreds of containers lost at sea every year, shipping is fraught with risks. Even if you’ve paid the utmost attention to packaging and securing your cargo, you can never account for every danger out there. A marine cargo insurance is the best way to protect yourself and have peace of mind while your cargo is in transit. To understand the extra charges you could incur on your marine cargo insurance, it is first important to understand what the insurance covers and what it doesn’t.
A marine cargo insurance covers loss or damage to cargo caused by:
- Bad weather
- Natural disasters – cyclone, earthquake, volcanic eruption, etc
- Man-made disasters – theft, piracy, violence
- Vessel collision, sinking, derailment and stranding
- Loss of cargo during loading/unloading
- Spillage from other containers
- Expenses such as survey fees, forwarding costs, reconditioning costs
A marine cargo insurance does not cover loss or damage to cargo caused by:
- Negligence, misconduct, delay and improper packaging
- Inherent vice (deterioration caused by the cargo’s inherent nature as opposed to an external factor)
- Customs rejection
- Failure to pay or collect
- Use of weapons
- War, strikes, riots and civil commotions
A marine cargo insurance is, however, not a water-tight defence against cargo loss and damage, and incidental charges might still arise in certain situations:
- If cargo damage was caused by a peril (risk or hazard) that was not insured against, then survey fees and other charges associated with proving a claim are not paid by the insurance company but by you. (A survey fee is the cost of an inspection of the insured cargo by a marine surveyor). Buying an “All Risks” marine cargo insurance is the only way to avoid such a fate.
- When a carrier is lost at sea in extraordinary circumstances not under its control (fire, storm, collision), the vessel and cargo owners share in the loss under the maritime law of General Average. This means the shipper must pay for the loss of the ship even after losing their cargo. What’s more, the amount to be paid might be more than the cargo value. Again, an “All Risks” insurance is perhaps the one way to escape all liability in such a case.
- Additionally, when a carrier makes a General Average claim, it will seize all cargo and release them only when the general average deposit (cargo owner’s share of the loss) has been calculated and paid. Such hold-ups can affect the shipper’s business and lead to extra expenses.
- It is mandatory for an exporter to provide the importer with evidence of marine cargo insurance, in the form of a policy certificate, under the CIF and CIP (Carriage and Insurance Paid To) Incoterms. Because it is not mandatory under the remaining Incoterms, it might qualify as an incidental charge – though it is highly recommended that all shippers give their cargo the added security of a marine cargo insurance.
- If you use the services of a broker/intermediary to buy marine cargo insurance or make a claim under one, you pay a brokerage fee.
That wraps up the guide on incidental charges in the shipping process. Extra costs are a given in international trade and it might be impossible to avoid them all. But a little research and planning can help you avoid a good many of them and save you a lot of grief later.
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