Demystifying Ocean Freight: A Comprehensive Guide for Beginners

Ocean freight is the movement of goods internationally through sea. It is also called sea freight. Ocean freight is the best option for shipping goods internationally. Mostly, 90% of goods are transported around the world by ocean.

It is required to review the shipping options from time to time for most business owners, whether they are just starting or are experienced in international shipping.

The method of transporting goods through sea is known as ocean freight. It is an important part of cross-border trade using which people can move bulk amount of goods between countries. Typically, the goods are transported on ships through the open ocean.

There are many types of shipping options available for different kinds of goods. Container shipping, also named containerization is one of the most popular type. Goods with standard sizes of 20 to 40 feet are shipped using containers with this option.

Other international freight transport modes, including courier, express air freight, and standard air freight are there apart from ocean freight. Shipping by air is involved in all of these transport modes and are therefore much faster than ocean freight. Typically, they take between one to two weeks. But they can only take smaller shipments and are also more expensive than ocean freight .

Ocean Freight has become an important part of international trade as a better overall cost is produced by it for larger shipments. It is certainly not cheap when shipping small quantities. It generally takes 40 to 60 days for the arrival of most shipments when Ocean Freight is used.

Container shipping is one of the most popular options for ocean freight due to its ease of handling and relative safety. Containers can be moved very easily without disturbing the goods in it that is to be shipped.  However,  container shipping is a good option that can be used only for certain types of goods, such as already packaged or dry goods.

LCL or FCL are essentially two types of shipping services that are available when it comes to container shipping. LCL refers to less than container load, while FCL is full container load. 

Shipping your goods by using one or more containers that you use exclusively is generally involved in FCL shipments. It can be ensured that your shipment will be undisturbed until you open the container by yourself as only your goods will be in the container. This is the best option when you have such amount of goods that can fill nearly or completely fill a container.

The goods need to be shipped are usually less than it takes to fill a container with LCL shipments. You can share the container with goods belonging to other people to split the cost as having a container that all contain goods that belongs to only, can be relatively expensive. Your goods may be more vulnerable to damage or mishandling during the voyage in this type of shipment which is the main disadvantage.

Ocean freight largely depends on the services of third parties called freight forwarders. Usually, freight forwarders is a company or third-party individual who pick up your goods, properly arrange them for loading, onboard for shipping, and properly delivered to the final destination. Usually, it is necessary to have some trusted  hands and eyes that can help collect your goods from the seller, arrange shipping and place your goods aboard the ship.

The shipping contract is also an important part of the shipping process. Standard international shipping terms called international commercial terms or Incoterms are there that govern ocean freight contracts. How far along the process will the seller be responsible for the goods, and at what point will the buyer takes over the liability for the shipment will be defined in it.

The most popular incoterms that are used often are:

The responsibility of the delivery process is shared among the buyers and sellers under the FOB agreement. Seller will be responsible to make sure the goods are labeled, packaged appropriately, and loaded correctly ready for shipping. The obligations will be transferred to the buyer once the goods have been loaded onboard.

The majority of responsibility is placed on the buyer with an EXW contract. The goods will be picked up by the buyers at the place of manufacturer and he will also be responsible for the transit of the goods to their final destination.

The maximum obligations will be taken by the seller and minimum obligations will be taken by the buyers with DDP. The seller will be responsible for the costs of shipping, and insures the goods and inland transportation in DDP.

The following stages will be involved in the process of concluding the ocean freight after deciding your shipping terms:

The start of the shipping journey is export haulage, in which your goods will be transported from the warehouse of seller to the warehouse of your freight forwarder.

Goods that are meant for export to first go through clearance is required by most countries. A detailed declaration of the cargo, along with supporting documentation is need to be provided for customs clearance.

All the activities that will be necessary to prepare your goods for shipping will be covered in this stage. The cargo will be placed in a staging area for inspection and confirmation. A cargo receipt will be issued by the freight forwarder confirming that they have received the goods as described once confirmed. The goods will be stacked in their container if the shipment is FCL. The goods will be placed in the warehouse with other goods in a container to await consolidation, that will be moved for the same destination port if the shipment is LCL. The container will be finally trucked to the port of departure to await loading on the ship.

Ocean freight is the actual transportation of the goods across the ocean which generally take anywhere from 20 to 60 days, depending on the destination. It may take days or weeks to reach this stage depending on several factors.

The goods will await import clearance once they arrive at their destination port. Completing the necessary forms, declaring the cargo and paying the necessary fees are involved in this stage.

All the activities necessary to confirm the goods, check the documents including the bill of lading and transporting the container to the warehouse of freight forwarder is covered in destination handling. The goods will be opened, checked and then sorted for import haulage in this stage.

Import haulage is the final stage of the process in which, the goods will be transported inland by using truck or train to the final destination determined by you.

Alternative arrangements for certain stages can be made to save costs, else the freight forwarder will be charged for handling every stage of the process.

Usually, ocean freight rates are determined based on a number of charges, such as the space taken up by the goods and the cost per weight of goods. Insurance, customs security surcharge, container freight station which applies to LCL consolidation only, pickup and delivery at ports and warehouses, routing charges, customs brokerage and fuel surcharge are other charges that may be included in the freight rate.

Ocean freight charges is not fixed. It may go significantly higher, or may fall even lower depending on a number of factors. These factors may be:

Fuel is critical for shipping goods through sea freight. The prices of fuel can sometimes be volatile.  Fuel cost is expected to rise when prices rise.

A severe loss for shipping lines, especially considering how long a single trip can take can occur even for a slight fluctuations in exchange rates.

The shipping industry gets affected in festive holidays as people often work less during these days. Usually, there is a spike in demand just before festive holidays like Chinese New Year that can drive freight rates up.

A lot more work is included for larger-sized shipments which will cost significantly more.

Containerized shipping is relatively cheap as it is quick, easy and effective. Other vessels, such as tankers used for liquid cargo, or bulk carriers used for unpackaged dry goods may be expensive.

Some of the advantages of ocean freight include:

Bulky shipments can be done smoothly by using sea freight. Other shipping options can be used for lighter products that are not being shipped in bulk. 

Ocean freight is generally much cheaper than other options like air freight.

Fewer restrictions are there for products which are shipped by sea. Flammable products like perfumes or biochemical products like some medicines can not be shipped on air freight.

Relatively lower emissions are produced by ocean freight than air freight. These emissions will be reduced even further by the introduction of new regulations by International Maritime Organization.

Here are some disadvantages of ocean freight to keep in mind：

Longer shipping time is required in ocean freight. It is much slower than air freight which generally takes about 30 to 40 days.

Ocean freight is more vulnerable to external factors like customs delays, bad weather, and port congestion which can easily delay your delivery.

Goods shipped by ocean freight are more susceptible to damage as they are in transit for much longer period of time.

Goods are at a greater risk of being mishandled or misplaced due to the many moving parts involved in ocean freight.

Ocean freight is a great option if you are shipping large or bulky goods, or when it is essential to reduce your shipping costs to save money. Ocean freight works well for a high volume of orders within the same period.

Generally, you should leave more than enough time for the goods to arrive if you are deciding to use ocean freight. You may be better off looking other options if you do not have flexible delivery dates else, you may get in to a less than ideal situation because of the the complexity of the process and the potential for delays. However, ocean freight is a great option for international shipping as it is a relatively cheap option, but only in the right circumstances.