Ocean Sea Freight Freight Rates and Surcharges 2 — Questions and Answers
Question 1: What is a 'Service Contract' in US ocean freight and who issues them?
- A confidential agreement between a shipper and an ocean carrier fixing rates and service commitments for a defined period (Correct answer)
- A government-regulated tariff published for public access
- A booking confirmation issued by the freight forwarder
- An agreement between carriers forming an alliance for shared vessel space
Correct answer: A confidential agreement between a shipper and an ocean carrier fixing rates and service commitments for a defined period
Under the Shipping Act of 1984 (as amended by OSRA 98), ocean carriers and shippers can enter confidential Service Contracts that fix rates, minimum volume commitments, and service standards for a contract period.
Question 2: What is a 'Spot Rate' in ocean freight?
- A one-time market rate quoted for an immediate or near-term shipment, subject to current supply/demand conditions (Correct answer)
- A rate locked in 6–12 months in advance through a service contract
- A discounted rate offered for returning empty containers quickly
- A carrier's standard published tariff rate
Correct answer: A one-time market rate quoted for an immediate or near-term shipment, subject to current supply/demand conditions
Spot rates are market-driven rates quoted for individual shipments without long-term commitment — they can be lower or higher than contract rates depending on vessel capacity and demand.
Question 3: What is a 'CAF' (Currency Adjustment Factor) in ocean freight surcharges?
- A surcharge added to base rates to compensate for exchange rate fluctuations affecting carrier revenues (Correct answer)
- A fee for cargo requiring special currency documentation
- An adjustment to freight rates based on commodity price changes
- A surcharge for shipments requiring payment in foreign currencies
Correct answer: A surcharge added to base rates to compensate for exchange rate fluctuations affecting carrier revenues
CAF is a surcharge applied when currency exchange rate movements adversely affect the carrier's revenue — it adjusts the effective freight rate to compensate for depreciation of the billing currency.
Question 4: What does 'W/M' (Weight or Measure) mean in LCL freight rating?
- The freight rate applies to whichever is greater — the actual weight (per ton) or the volume (per CBM) — giving the higher chargeable figure (Correct answer)
- Cargo is rated purely by weight with no volume consideration
- Both weight and measure are averaged to calculate the freight charge
- W/M refers to the waypoint and milestone tracking system
Correct answer: The freight rate applies to whichever is greater — the actual weight (per ton) or the volume (per CBM) — giving the higher chargeable figure
W/M (Weight or Measure) means the freight charge is calculated on either 1 metric ton or 1 CBM — whichever yields a higher charge — ensuring the carrier is compensated fairly for both heavy and bulky cargo.
Question 5: What is an 'EBS' (Emergency Bunker Surcharge) in ocean freight?
- An additional fuel surcharge imposed when oil prices spike beyond normal BAF adjustment levels (Correct answer)
- A fee for emergency vessel rerouting due to weather events
- A surcharge for priority loading on heavily booked vessels
- A penalty for container bookings cancelled within 24 hours of sailing
Correct answer: An additional fuel surcharge imposed when oil prices spike beyond normal BAF adjustment levels
EBS is imposed by carriers on top of BAF when sudden, significant increases in fuel costs cannot be absorbed by the existing BAF level — it is a short-term reactive surcharge.
Question 6: What is a 'Minimum Bill of Lading Fee' (Minimum B/L) in ocean freight?
- The minimum freight charge applied regardless of actual cargo weight or volume (Correct answer)
- A fixed fee charged by the carrier for issuing the Bill of Lading document
- The lowest rate a carrier will accept under any service contract
- A minimum charge per container booking for administrative processing
Correct answer: The minimum freight charge applied regardless of actual cargo weight or volume
The Minimum B/L establishes the floor charge for a shipment — even if the W/M calculation results in a very low freight figure, the shipper pays at least this minimum amount.
Ocean Sea Freight Freight Rates and Surcharges 2
What is a 'Service Contract' in US ocean freight and who issues them?