Ancillary charges are typically broken out from base rates in order to specifically address cost impacts to carrier operations, as opposed to the value of particular transportation and logistics services provided in a particular commodity or country market. Carriers achieve greater predictability in their revenue streams and shippers gain better transparency and understanding of their costs.
Surcharges are ‘floating’ charges, adjusted on a regular basis to reflect costs that are in constant flux, such as exchange rates or world marine fuel prices. They include the following terms:
Bunker Adjustment Factor Compensates for wide fluctuations in marine bunker fuel and diesel oil (BAF/BUC/FAF).
Fuel Surcharge Changes in fuel prices result in fluctuating costs for the transport industry, necessitating a variable fuel surcharge which may rise, fall or be removed, in line with movements in fuel prices
Addresses costs related to schedule delays, rerouting of cargo and other impacts from sudden or sustained port congestion.
Addresses higher insurance premiums, shipment rerouting or rescheduling, and other increased costs serving countries at risk of war or armed conflict.
A small customary payment over and above the freight and BAF/BUC made to the master of the ship for his care and trouble. It is now generally included in the freight, as an additional percentage. It varies according to the usages of different ports and particular trades.
Currency Adjustment Factor A freight surcharge or adjustment factor imposed by carrier’s to offset foreign currency fluctuations. In some cases an emergency currency adjustment factor may be applied when a charge or rate has been originally published in a currency that is experiencing sustained or rapid decline. The CAF is charged as a percentage of the freight charge’s and ancillary charges.
General Rate Increase which is applied by the individual shipping lines. The rate is subject to fluctuation. (also known as ERR)
International Ship and Port Facility Security Code is an amendment to the Safety of Life at Sea (SOLAS) Convention (1974/1988) on minimum security arrangements for ships, ports and government agencies.
Peak Season Surcharge compensates for the large volumes of traffic being exported from Asia (excluding Japan) to North Europe, Baltic and Scandinavian areas and is now decided by the individual shipping line. This fee remains in effect for the duration of a typical peak season currently from 21.11.09 – 31.03.10 (dates correct as of 21.11.09)
As a consequence of the on-going piracy attacks in the Gulf of Aden, lines have implemented a piracy surcharge. (Also known as ERS – Emergency Risk Surcharge or Aden Gulf surcharge). The surcharge contributes to the additional costs due to the security situation in the Gulf of Aden. The additional costs include crew risk compensation, cancellation of economical speed and redeployment of vessel.
A study undertaken by the lines into the tariff announced by the Suez Canal Authority from the 1st October 2007 has identified major increases in the cost of transiting the Suez Canal.
A Heavy Weight Surcharge may apply on 20í containers from the Far East due to the volume of heavy exports exceeding space available on vessels. This charge is implemented by carriers to try and maximise space on vessels before the weight capacity is exceeded.