Friday, September 24, 2010

Ocean Freight Options

If you've got time, ocean freight is always the most cost effective choice.  You probably think about containers when you think ocean freight, but there are more options in both time and cost.

Once again, let's start with vocabulary:
NVOCC: Non-vessel operating common carrier, just like it sounds.  An NVOCC can issue bills of lading, but doesn't operate its own vessels.
Carrier: The company that operates the vessels.  They may or may not own the vessel, and they may or may not issue your bills of lading.
Bill of lading (BOL): the primary transportation document.  I'll write about documents another time.
Dunnage: material used to brace freight in a container or on the vessel, usually wood.
LCL: Less than Container Load
FCL: Full Container Load
LTL: Less than Truck Load
Cut or Cutoff: Date and time when freight has to be turned in to the carrier to make a specific sailing
Flat Rack: a rack the size of a container base.  It has foldable or removable walls on the 8' sides and lugs to secure freight and lift the rack.

Ocean freight can range from a single crate to a vessel charter.  Speaking of crates, you're going to need to know about ISPM-15.  ISPM-15 is the international standard for wood packing materials (there are different rules for product made of wood, and if you're importing wood products you need to be aware of recent changes).  Essentially, wood packing material (skids, crates, or dunnage) needs to be either made of manufactured wood or from heat-treated or fumigated wood.  If you go with heat-treated or fumigated, the wood needs to display the supplier's ISPM-15 stamp.  Companies that do their own crating can register for ISPM-15 certification.

Back to freight types.  If you're shipping bulk commodities, bulk vessel charters are the way to go.  Bulk product is loaded loose into the hold.  Liquid carriers are essentially the same.  Wheat, metal ores, and oil ship this way - there's even been talk of shipping water from Alaska to the Middle East.  If you're shipping large products that aren't bulk commodities or shipping a lot of things at once, you can charter or part-charter every kind of vessel.

But chances are you aren't going to be chartering a vessel.  FCL is the most cost-effective option, and offers the shipper a little less risk.  When you book an entire container, you get all the volume within the container with one set of document expenses.  Your employees (usually) load it, so you know it was done correctly.  Plus you seal the container when it leaves your facility and it'll be sealed at destination unless Customs chooses to do a physical inspection.  (Seals are single use bolts with serial numbers on both pieces.)

If you don't need an entire container, you can book LCL.  With LCL, you share a container with other shippers.  LCL loads are built by consolidators on behalf of the carrier or directly by freight forwarders.  Before you book LCL, check your weight/volume and think about if LCL is the least expensive option.  Under 150# is going to be less expensive by deferred air, between 150# and 500# the least expensive option will vary by origin and destination.

Just like air freight, you can book through a freight forwarder or the carrier.  Shippers usually work with forwarders unless they do major volume (think Target or Walmart).

Let's go back to the motor from the air freight post.  If the motor is in Minneapolis and needs to be in Singapore in four weeks, do you have to air freight it?  No.

If you're shipping ocean freight to Singapore from the US, chances are it's going be exported through Long Beach.  The Minneapolis cut is going to be ~10 days before the Long Beach cut for the same vessel.  So you can truck to LA (2-3 day transit) for an earlier sailing.  It costs you a couple hundred dollars more than the Minneapolis cut, but it costs less than air freight.  You can do the same thing with container freight - truck your crates to Long Beach and have them loaded into a container by a packer.  Again, more expensive than a Minneapolis cut but less than air  freight.

If your freight doesn't fit in a container?  Break bulk freight is loaded loose, generally by crane.  If you can put the freight on a flat rack, the flat rack is a better choice.  Flat racks go on the top of container stacks, so you have a lot more vessel options.  Plus break bulk is going to be a lot more expensive because it's done at the port instead of a packer.

Finally, carriers are subject to only limited liability.  If your general insurance policy doesn't cover shipping loss or damage, you should consider insurance through the freight forwarder.  After all, accidents happen.

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