Ocean freight, often known as sea freight, is the international transfer of products by sea. Ocean freight is by far the most popular mode of international cargo transport. Approximately 90% of goods1 are transported by sea around the world. However, just because something is popular does not mean it is the only or best alternative.
Whether you’re new to international shipping or a seasoned pro, most business owners discover that they need to revisit their alternatives from time to time. We’re here to assist you if you’re wondering, “Does ocean freight make sense for me?”
You’ll learn everything you need to know about ocean freight in this article, including what it means, how it works, how much it could cost, and when it makes the most sense to use it.
What is the definition of ocean freight?
The method of shipping products by sea is known as ocean freight. It’s a crucial aspect of cross-border trade because it allows people to transport large amounts of commodities between countries.
Typically, products are delivered by ship over open oceans. For various types of goods, there are a variety of shipping alternatives available. Container shipping, often known as containerization, is one of the most popular. Containers with conventional sizes of 20 to 40 feet are used to transport goods in this option.
Container shipping is one of the most popular ocean freight options, as previously stated. This is owing in great part to its relative safety and convenience of use. Containers can be easily shifted without causing any disruption to the contents being carried. They are, however, only suitable for particular types of commodities, such as dry or pre-packaged items.
There are essentially two types of container shipping services available: LCL and FCL. FCL stands for full container load, while LCL is for less than container load.
FCL shipments entail transporting your goods in one or more containers that you solely use. The container will only hold your products, ensuring that your shipment will remain undisturbed until you open it yourself. When you have things that can fill or nearly fill a container, this option makes the most sense.
The products intended to be delivered are frequently less than what it takes to fill a container with LCL shipments. Instead of paying for a container all to yourself, which might be costly, you can split the cost and share the container with other people’s belongings.
What is the best way to ship utilising ocean freight?
Ocean freight is primarily reliant on the services of freight forwarders, or third-party logistics companies. Freight forwarders are third-party individuals or companies who pick up your products, properly load and load them onboard for transport, and then deliver them to their final destination. This is because it is common to require the assistance of trustworthy eyes and hands to collect your products from the vendor, organise shipping, and load them onto the ship.
You should also be aware of the shipping contract, which is a crucial aspect of the process. Ocean freight contracts are governed by conventional international shipping terms. These are referred to as “Incoterms,” which stands for “international commercial terms.” It specifies how far along in the process the seller is accountable for the products and when the customer becomes responsibility for the shipment.
The following are the most commonly used incoterms:
FOB (Free on Board): Under the FOB arrangement, the delivery procedure is shared between the customer and the supplier. The seller is responsible for ensuring that the products are properly packaged, labelled, and loaded for shipping.Once the goods have been loaded onboard, the obligations transfer to the buyer.
EXW (Ex Works): In an EXW contract, the buyer bears the majority of the responsibility. The buyer picks up the items from the manufacturer and is in charge of their transportation to their final destination.
DDP (Delivered Duty Paid): With DDP, the supplier assumes the most obligations, while the customer assumes the least. The seller is liable for the costs of shipping, insurance, and inland transportation, according to the agreements.
What factors go into determining Ocean freight rates?
Ocean freight rates are normally calculated based on a number of factors, including the cost per pound of products and the amount of space they consume. Ocean freight, for example, is usually around 50 cents per kilogramme (kg) 2. Other fees that could be included in the freight rate are:
- Customs security surcharge
- Container freight station (this applies to LCL consolidation only)
- Pickup and delivery at ports and warehouses
- Routing charges
- Customs brokerage
- Fuel surcharge
What are the advantages and disadvantages of maritime freight?
Ocean freight may be popular, but it has its highs and lows, as you have already discovered. The following are some of the benefits of maritime freight:
- Sea freight has a higher transport capacity, making it ideal for large cargoes. Other shipping alternatives are only practical for lightweight items that aren’t being transported in large quantities.
- Ocean freight is substantially less expensive than other options, costing only 50 cents per kilogramme. When compared to ordinary air freight, which costs around $4 per kilogramme, and express air freight, which costs over $6 per kg, this is a bargain.
- There are less restrictions:There are various restrictions on the kind of items that can be shipped by air freight. For example, combustible materials such as fragrances and biochemical products such as some medicines cannot be shipped by air freight. When shipping by sea, there are less constraints.
- Lower carbon footprint: Ocean freight emits fewer greenhouse gases than air freight. The International Maritime Organization has introduced new standards that will further minimise these pollutants.
Despite the benefits, there are some drawbacks to consider:
- Longer delivery time: Shipping by ocean is substantially slower than shipping by air, which is often five to six times faster. In the case of freight between the United States and China, shipping by sea takes about 30-40 days, whereas shipping by air takes approximately a week, and express air can take as little as three days.
- Unpredictable shipping: Ocean freight is more susceptible to exogenous shocks such as severe weather, customs delays, and port congestion than other modes of transportation. This can easily extend the time it takes for your package to arrive by days or weeks.
- Less protection: Goods carried by ocean freight are more vulnerable to damage because they are in transit for a longer period of time.
When is it more cost-effective to ship goods by sea?
If you’re delivering large or bulky items, or if you need to cut shipping expenses to save money, you should consider using ocean freight. When you have a large number of orders to ship in a short period of time, ocean freight is a great option.
However, if you want to ship your items via ocean freight, you should allow plenty of time for them to arrive. You could be better off exploring elsewhere if you don’t have flexible delivery dates. Otherwise, the process’s complexity and the possibility of delays may leave you in a less-than-ideal scenario.