When we decide to import commodities, we also need to determine how we will import them – by air, rail, or maybe by road? The following article will present the most popular way of transporting products, namely maritime transport.
What is maritime transport?
Maritime transport (ocean transport) is a term for large loads of cargo carried by cargo ships. Since the 1960s, ocean transport primarily uses containers. Containerisation made transportation of large shipments easier, decreased the costs of storage and fuel consumption, with the possibility of tracking a box reduced uncertainty and removed the need for transshipment. It also shortened the time lost by the vessels in ports (before containerization cargo ships spent even 2/3 of their lifetime in ports.)
Ocean freight is the most popular way of carrying cargo among people and companies engaged in international trade. It is the least expensive and relatively environmentally friendly option, but also the most time-consuming one.
The largest container ports in the world and popular sea routes
According to the World Shipping Council, all ten biggest container ports are located in Asia. Among them, seven are located in China, including the port of Shanghai, which occupies the first place on the list. China owns a long coastline and uses it to handle cargo vessels in 34 larger and 2000 smaller ports.
The largest containers ports by continents:
- Shanghai (Asia)
- Rotterdam (Europe)
- Los Angeles (North America)
- Santos (South America)
- Colon (Latin America)
- Tanger Med (Africa)
- Hedland (Australia)
The largest container ports in Europe are:
- Rotterdam (the Netherlands)
- Antwerp (Belgium)
- Hamburg (Germany)
- Bremen/Bremerhaven (Germany)
- Piraeus (Greece)
- Algeciras (Spain)
- Valencia (Spain)
- Felixstowe (Great Britain)
Popular ocean routes pass through the English Channel, the Panama Canal, the Suez Canal, the Straits of Malacca, the Bosporus, the Strait of Hormuz, the Danish Straits, and the Saint Lawrence Seaway in North America.
The Marine Traffic graphic, which is attached below, shows the main ocean routes and clusters of cargo ships worldwide.
How does maritime transport work?
At first sight, carrying cargo by sea can seem slightly complex; however, after taking a closer look, one will realize it is very well-structured and organized. The order of steps is as follows:
- Pick-up of the cargo from a manufacturer.
- Delivering cargo to a warehouse. There, shipment is controlled and packed and then loaded to a container.
- Customs clearance at the port of origin.
- Transportation of cargo aboard the vessel.
- Customs clearance at the port of destination. A lack of appropriate documents can result in the package being stopped at customs, just like in the port of origin.
- Transportation of cargo to a warehouse and unloading.
- Carrying cargo to its place of destination.
As can be seen above, it’s not an overly complicated process. However, it requires us to prepare beforehand and decide on a few issues, such as choosing the right container type, or rules by which our cargo will be transported.
Types of ocean transport
- FCL – Full Container Load. Cargo is loaded to 20-40′ long containers, with a capacity of 32.3 to 76.6 cubic meters. The load cannot exceed the maximum allowed weight – from ca. 21 t to ca. 26 t. FCL is perfect for the transportation of large amounts.
- LCL – Less than Container Load. A few importers share space in the same container. It is ideal for carrying loads that do not fill an entire box. The downsides of such a solution are frequent stops and opening the container to load a cargo of other consigners.
- Bulk cargo – includes coal, cereals, wood, and other natural resources in large amounts. There are carried by a particular type of ship, called bulk carrier.
- Out of Gauge (OOG) cargo – transport of machines and other constructions that cannot be disassembled.
- Ro-ro (Roll-on/Roll-off) – cargo is brought aboard and unloaded directly in a vehicle.
- Hazardous goods – among others, chemicals, flammable, toxic or radioactive materials, transport of which requires special permits and precautions. Products that contain batteries such as laptops or phones, as well as perfumes and aerosols, also belong to this category.
Maritime transport and Incoterms
Incoterms (International Commercial Terms) define the division of costs and duties between a seller and a buyer. They also apply in the case of ocean transport. Getting familiar with at least a few of the popular solutions can help us choose the most optimal option for us.
- EXW (ex-works) – a term with the least amount of responsibility on the seller’s side. They only need to make the packed products and documentation available in a pre-arranged location. Then the buyer bears all the costs and responsibilities. For this reason, EXW is most often used by already experienced importers.
- FOB (free on board) – just like in EXW, the buyer has the freedom of choice when it comes to freight forwarding agency. The seller is responsible for the cargo until the moment it is loaded on the vessel. That means they also deal with customs clearance at the port of origin. It is a highly recommended rule as it allows flexibility. Overall, FOB is usually slightly cheaper than EXW.
- FCA (free carrier) – a term applied in all means of transport and intermodal transport. The seller needs to deliver the goods to a place that both sides agreed upon and pay the duties.
- CFR (cost and freight) – the seller additionally bears the cost of sea freight until the vessel arrives at the port of destination. The buyer does not choose a freight forwarder; however, as soon as the goods are loaded aboard the ship, they bear the responsibility and insurance costs.
- CIF (cost, insurance, and freight) – CFR, but the seller takes the insurance costs until the vessel arrives in the destination port. A prevalent method, yet it does not allow for transport that uses more than one mode of transportation (then CIP is used.)
Remaining Incoterms include CPT, CIP, DPU, DAP, DDP, and FAS.
Pros and cons of maritime transport
- Cheaper than air or rail transport
- Transportation of large and hazardous goods is possible
- More environmentally-friendly than air forwarding
- Long shipping time – usually about 25 – 40 days
- Possible delays, e.g., due to bad weather, holidays, congestion in ports or problems at customs
- Need for extra transport to and from port
Ocean freight – costs
The cost of sea freight depends on a few factors: weight and dimensions of the cargo, the distance between the port of origin and destination, and type of commodities – transport of hazardous goods or goods that require refrigerated containers will be more expensive. The choice of insurance also has an impact on the total cost of transportation. It is not mandatory but recommended.
Besides the cost of freight, sea transport also entails additional fees, e.g., fuel surcharge, Container Service Charges (CSC/THC), International Ship and Port Facility Security Code (ISPS) fee, duties and freight documentation fee.
Below are illustrative costs of international sea freight:
- Ningbo – Gdynia – 20’DV – 1110 – 1490 USD
- Szczecin – Dublin – 20’DV – 865 USD
- Lisbon – Busan – 20’DV – 1600 – 2400 USD
- Shanghai – Gdansk – 40’DV – 1580 – 2100 USD
- Tianjin – Hamburg – 40’HC – 1640 – 1940 USD
- Hamburg – Mundra – 40’HC – 1840 USD
- Haifa – Bangkok – 0.1 m3 – 250 USD
- Stambul – Los Angeles – 1 m3 – 100 – 150 USD
- Stambul – Singapore – 2.2 m3 – 750 USD
- Ningbo – Gdansk – 5 m3 – 300 – 545 USD
Ocean freight and packaging
For our goods to safely reach their destination, they need to be appropriately packed. The most convenient solution is packing goods into carton boxes and placing them on palettes that are then loaded to containers. Based on the dimensions of boxes and palettes, we can calculate which container will be cost-effective. Cargo is usually put on palettes at the production site or in port warehouses.
Documents required for customs clearance
The goods we bought cannot leave their country of origin or reach their destination unless accompanied by appropriate documents. They are checked by the customs officials. The most vital documents include a commercial invoice, packing list, bill of lading, and insurance certificate. Depending on the kind of goods, we might also need to provide certifications such as the certificate of origin or CE or other documents such as safety data sheet (SDS) for hazardous goods.
- The bill of lading confirms that the goods have been loaded on board.
- The packing list contains a detailed inventory of imported products.
- The commercial invoice confirms our purchase.
What is freight forwarding?
Freight forwarding agencies deal with logistics of transportation of goods, including all essential means of transport, e.g., trucks carrying cargo from the manufacturing site to the port, then a cargo vessel, and finally another car. Freight forwarders also organize all documents needed for customs clearance. To sum up, it is worth choosing the right freight forwarder, so our goods’ transport goes as smoothly as it can.
Note that it is not the importer but freight forwarders who organize sea transport. On our website Shiphub.co importers can compare offers of different freight forwarding agencies and choose the most suitable one.