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How to Calculate Sea Freight Shipping Costs for Ocean Container Shipping?

Sea freight shipping costs: Volume discount rates

Volume discount rates are another form of rates that emerged in response to the development of ocean container shipping. Basically, it means that shippers are given a certain rate discount based on the quantity of goods shipped. This means that the larger the quantity of goods shipped, the lower the freight rate. Of course, this rate can be a uniform rate or a specific commodity grade rate. Since this volume incentive method determines the freight rate based on the quantity of goods shipped, large shippers usually benefit from it.

Initially, this attempt at discount rates was not very successful because some intermodal operators promised to transport a certain amount of containers, such as 500 TEUs, when signing a contract with the carrier, thus obtaining a certain rate discount from the carrier. However, at the end of the contract period, they did not transport the number of containers specified in the contract, for example, only 250 TEUs were transported.

Obviously, the carrier will feel that it has suffered losses. This is why the so-called proportional increase and decrease system is becoming increasingly popular. Under this system, a shipper who has 500 TEU container goods, will pay a certain freight rate when shipping a 100 TEU container for the first time. When they ship a second 100 TEU container, they will pay a lower rate, and when they ship a third 100 TEU container, the rate will be even lower, and so on.

Sea freight shipping costs: Lump sum rates

Lump sum rates are a form of freight rate that has emerged in response to the development of ocean container and intermodal transportation. This form of rate sets different lump sum rates according to different commodities and different container types. In other words, the calculation unit of various rates has been simplified from tonnage to per container. For carriers, this rate simplifies calculations and reduces related management costs. Lump sum rates for different grades of goods are classified in the same way as the grade classification for general cargo transportation (1-20 grades). However, the rates for container goods can be roughly divided into four groups, such as 1-7 grades, 8-10 grades, 11-15 grades and 16-20 grades, or 1-8 grades, 10-11 grades, and 12-20 grades, but there are also only three rate levels.

Sea freight shipping costs: Uniform rates

Uniform rates refer to a uniform tariff applied to all goods. Its basic principle is that the shipment of goods in a container has nothing to do with the freight rate charged. In other words, all goods with the same route are subject to the same rate regardless of their value. In fact, carriers distribute their estimated total costs to each container to derive the basic average rate. This form of sea freight shipping costs is theoretically logical because what is shipped on the ship and loaded/unloaded at the port is the container rather than the goods, and the space and area occupied by the container are the same. However, adopting this form of rate may have a negative impact on the transportation of low-value goods because low-rate goods can no longer be compensated from high-rate goods. This may be unacceptable for shippers of low-rate goods.

For example, an ocean container shipping company charges the same freight rate for shipping bottled water and bottled wine, although the owners of bottled wine may not be concerned about this, the owners of bottled water will refuse to accept this situation, and the shipping company is forced to charge different rates for these two types of goods. Therefore, in most cases, uniform rates actually classify goods into 5-7 rate levels.