Welcome to TLI University!
With more than 20 years in the industry we thought it was time to pass along some of the knowledge that helped us get to where we are today. This is a weekly publication aimed to educate anyone who is curious about transportation and shipping.
What is Ocean Transportation?
- Shipments that move to other countries or to U.S. islands, such as Puerto Rico, can move via ocean transport
- Shipments are loaded into ocean containers, which come in standard sizes of 20’ and 40’ for global shipping – some containers moving to Puerto Rico can also come in 45’, 48’ and 53’ – these containers can be dry containers or temperature controlled (refrigerated) containers
- Just as with rail intermodal containers, these containers are picked up and delivered by truckers known as drayage carriers – their primary purpose is transport containers between ocean docks and shippers / consignees
- After these containers are loaded and transported by truck to the docks, they are loaded by crane onto ships
- Once all of the containers are loaded on to the ship, the ship sails to ports all over the world – some of these ships are so large than they can hold a few thousand containers in their bellies as well as on their decks
- After the ship arrives at its destination port, the ship is unloaded and the containers are delivered to their ultimate destinations by drayage carriers
- These moves do not always go as planned ….
- Ocean shipments will require a considerable amount of time from order placement to delivery – 3 days or more notice to schedule a container to arrive at a shipper’s dock is generally needed – depending on the shipping lane, ships will generally depart a dock twice per week to once every two weeks or month – after departure, ships will be on the ocean for up to several weeks
How are Ocean Shipments Priced?
- Ocean shipments can move via two methods – FCL (full container load) and LCL (less than container load) – their pricing is calculated very differently
- FCL shipments are much like truckload shipments – the shipper purchases the right to utilize the entire container – they are also priced much like truckload
- There are 3 separate movements which comprise an intermodal FCL ocean shipment – origin inland drayage, ocean transportation from port to port, and destination inland drayage – these movements can be priced through the 2 or 3 individual companies or through just the shipping line – if it is set up through the shipping line, they will set-up and pay the drayage carrier(s) – this method is the most commonly used
- A shipper based in the United States will generally only pay for the inland U.S. portion, export or import, and the ocean transportation to or from the foreign port – the foreign shipper or consignee will generally manage the inland drayage transportation within the foreign country – the U.S. based company can contract and manage all 3 segments of the transportation, but it is generally very cost prohibitive to do so
- As with a truckload shipment, an FCL shipment will be billed a flat rate from the origin to the dock or from the dock to a destination
- In addition to the flat charge, FCL ocean shipments are assessed with several standard accessorial charges – some examples of these are as follows:
- Documentation Charge – the charge for a shipping line to prepare necessary documentation and paperwork
- Terminal Handling Charge – the charge for the ocean port to process and handle the container – this includes the use of cranes to load / unload containers
- Forwarder’s Handling Fee – this charge is to pay the Freight Forwarder for their services
- Bunker Fuel Surcharge – this charge is a Fuel Surcharge for the ship’s diesel
- Security Charge – additional charges to help ports meet security standards set forth by the Department of Homeland Security
- Due to all of these extra charges, it is VERY important to request the TOTAL quote for an ocean container – ask the ship company to provide an itemized quote
- For smaller shipments that will not fill the capacity of even a 20’ container, LCL (less than container load) service is available – this is priced much like an LTL shipment – by weight and cubic volume
- As with FCL shipments, LCL shipments consist of 3 separate transportation charges – LTL portion from origin to port, LCL ocean transportation, and LTL portion from port to destination
- The LTL portions are priced via standard LTL pricing
- The ocean transportation portion is billed by the greater of the rate as determined by weight or the rate determined by cubic volume – the cubic volume rate is used for the same reason that freight class is used in standard domestic LTL service – it helps avoid using too much of the container for the low weight of a low density product
- As example, assume that we have a shipment that weighs 700 pounds on a 48”x48”X36” pallet and the steamship charges $35 per hundredweight (CWT) or $5.00 per cubic foot for their ocean charges
- The rate based on weight would be 7 (hundredweights) multiplied by $35 or $245
- To determine the rate per cubic volume, we would first need to determine the cubic footage (volume) of the shipment. To accomplish this, we multiply the inches (48x48x36) to arrive at 82,944 cubic inches – we divide this number by the factor of 1,728 to determine cubic footage .. 82,944 / 1,728 = 48 cubic feet
- The rate based on cubic volume would be 48 cubic feet multiplied by $5 per cubic foot or $240
- Since the rate based on weight yields the highest revenue for the ship company, the LCL ocean portion of our transportation bill would be $245
- LCL transportation also requires substantial lead times – it is of vital importance to request delivery timelines from the ship company so this information can be relayed to the customer – specific itemized quotes are also needed
What information is needed when booking an Ocean Shipment?
- Origin (Shipper) City, State and Zip Code
- Destination (Consignee) City, State and Zip Code
- Shipping Date and Time – When is the specific time or “window” that the shipment is to be picked up by the carrier?
- Note – As mentioned above, it is optimal to have the customer provide us with 3 day notice or more to secure equipment – specific appointment times may or may not be required
- Note – It is also very important to tell the customer how long the expected transit time is to ensure that they have enough time built in to their lead times to have the flexibility to utilize ocean transportation
- Delivery Date and Time – When is the specific time that the shipment is to be delivered by the carrier?
- Note – As mentioned above, a U.S. shipper generally only manages the transportation to the destination port and will not be responsible for the final delivery to the consignee – once the ship docks, the ship company will inform the final consignee that the container will be unloaded from the ship and will be available for pick-up – at that point, the consignee will schedule the trucking company (drayage) of their choice to retrieve the container from the port and deliver it to the consignee
- Customs Clearance – When a U.S. company exports material to a foreign country, the foreign country is responsible for selecting and paying a customs agent to clear the goods into their country – some ship companies will want to know who the customs agent is ahead of time so they can attempt to pre-clear the goods or at minimum know who to contact when the container(s) arrive in port
- Number and Types of Pieces Shipping – How many pallets, bundles, cartons or pieces are shipping?
- Weight and Size of the Shipment – How much does the total shipment weigh? What is the size of the shipment? This information will help us determine if we can utilize LCL service or if we will need to book an FCL shipment – If we do require a full container, the weight and size of the shipment will allow us to determine what size container we need to order
- Commodity of Shipment – What product(s) does the shipment consist of? The ocean carriers will only be concerned with the commodity – they are generally not concerned with the National Motor Freight Classification of the commodity – they will also need to know if any part of the shipment contains Hazardous Material or not, as these products require special handling and consideration – the actual commodity will however be needed for Customs
- Purchase Order and / or Other Reference Number – what is the customer’s Purchase Order Number? What paperwork do they need it listed on? Is there any other reference number that the customer would like included on their paperwork?
- Value of Shipment – Is the product high value? Is additional cargo insurance required? Additional cargo insurance can generally be purchased at a quoted rate by the carrier
Stay tuned for more information on transportation modes!