1.

1 Introduction
What is Ocean Freight?

Ocean freight (or sea freight) is the most common form of transport for importers and exporters,
accounting for 90% of goods transported globally. Ocean shipping is the transportation of goods that are
packed in large cargo containers and moved by ship. These shipments are usually picked up by a vessel at
major ports and transported overseas via specific shipping lines. Ocean Freight Shipping provides the
most efficient and remarkable services of transporting of the goods to the different places all over the
world and as oceans naturally cover most of the areas of our planet, it is the most efficient and easy mode
of transportation.

There are 3 types of ocean freight shipments.

1. Full container loads(FCL)

FCL (full container load) is an ocean shipment in which the cargo occupies a full container (of
any size).

Figure 1 : Full Container Load

2. Less than container loads(LCL)

Less than Container Load refers to the shipping of the product where cargo from multiple
customers is consolidated into one standard marine container.

Figure 2 : Less than Container Load

3. Non- containerized loads for oversized (break-bulk) shipments.

 Breakbulk cargo is defined as general cargo or goods that do not fit in or utilize standard shipping
containers or cargo bins. Breakbulk is also different from bulk shipping, which is used for cargo such
as petroleum products or grain. Instead, breakbulk cargo is transported individually, oftentimes on a
skid or pallet or in a crate.

Examples of breakbulk cargo include construction equipment, manufacturing materials, oversized

vehicles, boats, cranes, turbine blades, ship propellers, generators, large engines and more.

Figure 3 : Break- Bulk Shipment

Advantages of Ocean Freight

 Cost Effective – transporting containers of goods by ship is the one of the most cost effective
forms of transport, which is important supply chain management and operations within a business
and can help keep the price of goods competitive for the end customers.

 Heavy goods – for items that are big or heavy, shipping might be the only way to get goods
overseas, as airlines can restrict form of transport and shipping ports generally have large storage
capabilities.

 Environmentally Friendly – ocean freight is the most environmentally friendly form of transport
for cargo, which can help boost the companies brand and reputation.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT:

FAS

Seller clears the goods for export and delivers them when they are placed alongside the vessel at the
named port of shipment. Buyer assumes all risks/costs for goods from this point forward.

FOB

The seller clears the goods for export and delivers them when they are onboard the vessel at the named
port of shipment. Buyer assumes all risks/cost for goods from this moment forward.

CFR

Seller clears the goods for export and delivers them when they are onboard the vessel at the port of
shipment. Seller bears the cost of freight to the named port of destination. Buyer assumes all risks for
goods from the time goods have been delivered on board the vessel at the port of shipment.
CIF

Seller clears the goods for export and delivers them when they are onboard the vessel at the port of
shipment. Seller bears the cost of freight and insurance to the named port of destination. Seller’s
insurance requirement is only for minimum cover. Buyer is responsible for all costs associated with
unloading the goods at the named port of destination and clearing goods for import. Risk passes from
seller to buyer once the goods are onboard the vessel at the port of shipment.

How are goods shipped?

Goods are loaded onto containers which are then shipped through the vessels. There are several types of
containers which come in different shapes and sizes, the main three types of containers here:

1. Dry storage container

The most commonly used shipping containers; they come in various dimensions standardized by ISO.
They are used for shipping of dry materials and come in size of 20ft & 40 ft.

2. Flat rack container

With collapsible sides, these are like simple storage shipping containers where the sides can be folded so
as to make a flat rack for shipping of wide variety of goods.
3. Open top container

With a convertible top that can be completely removed to make an open top so that materials of any
height can be shipped easily.

4. Open side storage container

These storage units are provided with doors that can change into completely open sides providing a much
wider room for loading of materials.
5. Double doors container

They are kind of storage units that are provided with double doors, making a wider room for loading and
unloading of materials. Construction materials include steel, iron etc in standardized sizes of 20ft and
40ft.

6. Refrigerated ISO containers

These are temperature regulated shipping containers that always have a carefully controlled low
temperature. They are exclusively used for shipment of perishable substances like fruits and vegetables
over long distances.
7. Insulated or thermal containers

These are the shipping storage containers that come with a regulated temperature control allowing them to
maintain a higher temperature. The choice of material is so done to allow them long life without being
damaged by constant exposure to high temperature. They are most suitable for long distance
transportation of products.
8. Tanks

Container storage units used mostly for transportation of liquid materials, they are used by a huge
proportion of entire shipping industry. They are mostly made of strong steel or other anti-corrosive
materials providing them with long life and protection to the materials.

Different types of cost for ocean freight

There are numerous tariffs and costs to consider when having goods shipped or importing goods from
overseas. Fees include for shipping the goods are:

 LCL or FCL fees

 Transportation to Port of Loading

 Export customs declaration

 Loading port fees

 Ocean freight charge

 Insurance

 Destination port fees

 Import customs clearance

 Customs duty/tax

 Transportation from the Port of Destination

 Destination country customs related fee (i.e. Duty/Tax)

 Destination port/terminal handling fee (i.e. THC)

  Destination agent service fee （i.e. D/O)

Documents Needed for Ocean Freight Shipping

 Freight Shipping Forms

There is large number of freight shipping forms required in order to move goods from one
destination to another. While you may not need all of these forms for each shipment, it’s
important to understand the reasons and requirements for each form.

 Bill of Lading
A Bill of Lading is essentially the contract between the owner of the goods and the carrier. This is
the same with domestic shipments. There are actually two types of Bills of Lading—the first type
is non-negotiable, while the second is a negotiable or shipper’s order Bill of Lading. The
difference is that a negotiable Bill of Lading can be bought, sold, or traded while the goods are in
transit whereas a non-negotiable Bill of Lading cannot.

 Commercial Invoice
Your shipping documents will include a commercial invoice. A commercial invoice is a bill for
the goods from the seller to the buyer. Governments often use these invoices to determine the true
value of the goods when they’re assessing tariffs and custom duties. The governments that rely on
commercial invoices to control imports usually specify the details these invoices need to have.
You may also need to provide additional copies of the commercial invoice.
Some countries require a consular invoice. Consular invoices are documents that describe the
shipment of goods and show other information, such as the consignor, consignee, and value of the
shipment. A consular invoice differs from a commercial invoice insofar as a consular invoice is
certified by the consular official of the foreign country stationed there.

 Certificate of Origin
Certain nations require a Certificate of Origin. This is essentially a signed statement that details
the origin location of the export item. Generally, Certificates of Origin are signed through
semiofficial organizations, such as a local Chamber of Commerce. It’s important to understand
that a Certificate of Origin may be required even if the commercial invoice already contains the
same information.

If products are traded among the countries included in the NAFTA agreement, then a NAFTA
Certificate of Origin is required. The NAFTA countries are Canada, the United States, and
Mexico.

 Inspection Certificate
For some purchases you may be required to include an inspection certification, depending on the
country. The inspection is usually performed by a third party or independent testing organization.

 Destination Control Statement

The commercial invoice includes a Destination Control Statement. This statement also appears on
the ocean or airway Bill of Lading. The purpose of the Destination Control Statement is to notify
the carrier and all foreign parties that the item can be exported only to certain destinations.
 Shipper’s Export Declaration (SED)
Freight shipping documentation is not limited to the documents required by the destination
country. Exports are also documented for official purposes. That’s why you need to fill out a
Shipper’s Export Declaration (SED). Your SED must be prepared for shipments whose value is
over $2,500.

SEDs also must be prepared, regardless of value, for shipments that require an export license or
are destined for countries that are restricted by the Export Administration Regulations. Generally,
SEDs are prepared by the exporter or exporter’s agent and delivered to the carrier. The SED may
also be prepared in conjunction with the Shipper’s Letter of Introduction.

 Export Packing List

Domestic shipments often require a packing list, but an export packing list is considerably more
informative and detailed. An export packing list itemizes the material in each individual package
and includes information about the type of package. Export packing lists also show weights and
measurements for each package in both the US standard and metric system.

The packing list is used by the shipper or forwarding agent to determine the total weight and
verify that the correct cargo is being shipped. Custom officials in the US and foreign countries
can use this export packing list to check the cargo, too.

 Insurance Certificate
An insurance certificate is used to assure the consignee that insurance will cover the loss of or
damage to cargo during transit. The insurance certificate will detail what is covered and for how
much.
Digitization of Shipping and Logistics Industry
The emergence of cloud platforms, collaboration and connectivity technologies, neutral digital networks,
advanced analytics platforms, Internet of Things (IoT), Artificial Intelligence (AI) and machine-learning
solutions have increased opportunities for Shipping & Logistics companies to embark on some level of
digital transformation.

Shipping’s digital transformation has been hanging over the industry for years now, and many have
started to talk about the sector’s digital revolution last year. The adoption of technologies like robotics
and connectivity are starting to show results, while key industry players are collaborating with technology
firms to create value in these new digital advances.

Eight pain points as given below in most shipping lines that will clearly benefit from digital
transformation.

The fundamentals of adopting a digital transformation call for a roadmap to becoming a digital business,
and transformation blueprints for each individual shipping line. There’s a need for internal awareness and
a change in organizational culture. Ultimately, digital transformation is all about digitally connecting
entire operations, eliminating manual processes and paper management, and automating relevant areas
where possible. Such a transformation can enable smart carriers to see an uptick in revenue growth and
cost savings.
Difference between Traditional and Digital Logistics

Digital technologies are driving a market transformation from traditional logistics to a new era of digital
logistics to make the shipping process simple and easy.

Traditional logistics

Traditional logistics could just as easily be called ‘paper logistics’. In fact, paper runs through all
processes, from product documentation and bookings to confirmation of logistics operations.

Paper documents are even scanned and converted into PDFs and then emailed to trading partners and
service providers, who, in turn, need to manually enter the same data into different IT systems.

Another name for traditional logistics might as well be ‘logistics by phone’. Stakeholders are constantly
on the phone with one another, trying to find the right transportation services, discussing terms and
conditions and inquiring about progress and cargo conditions.

Surely, these analogue practices must be a thing of the past, you may wonder. They are not. Many
(perhaps even most) industrial logistics operations are still done this way. Organisation may use various
software systems for managing operations, but they are not necessarily able to exchange information
directly (electronically) between these systems.

Digital logistics

Digital logistics is driven by a new generation of cloud-based logistics management systems that enable
optimization, visibility and collaboration between all stakeholders in the end-to-end supply chain.

Data is seamlessly exchanged electronically between the different management systems and applications,
and – crucially – it is entered into the systems once and reused multiple times.

Digital logistics have one or more of three key features:

 Convergence of logistics and technology

 Cloud-based collaborative solutions that extend through the entire supply chain

 Tight integration of warehouse, transport and end consumer information, featuring complete
transparency through the supply chain.

Digital logistics attaining fulfillment excellence. Logistics is about getting the right product to the
right customer, in the right quality, in the right condition, at the right place, at the right time, and
at the right cost (the seven Rs of logistics).

As supply chains have grown even more complex, traditional logistics no longer delivers on this
promise. Digital logistics does.