How terminal fees impact shipping costs

Introduction

Terminal fees are an often overlooked but significant component of overall shipping costs. As logistics professionals, we at FreightAmigo understand how these fees can impact your bottom line. In this article, we’ll explore what terminal fees are, how they’re calculated, and strategies for managing their impact on your supply chain.

Recent data from Drewry Shipping Consultants highlights the growing significance of terminal fees:

• Terminal handling charges now account for 15-20% of total ocean freight costs on many trade lanes
• Terminal fees have increased by an average of 6.5% annually over the past 5 years
• Fees can vary by over 300% between different ports for the same cargo

What are Terminal Fees?

Terminal fees, also known as Terminal Handling Charges (THC), are charges levied by port terminals for handling containers and cargo. These fees cover the costs associated with loading and unloading containers from vessels, moving containers within the terminal, and providing necessary equipment and labor.

Terminal fees typically include:

• Container lift on/lift off charges
• Yard handling fees
• Documentation fees
• Security charges
• Infrastructure fees

Factors Influencing Terminal Fees

Several factors can impact the terminal fees charged at different ports:

1. Port Infrastructure and Technology

Ports with modern infrastructure and automated systems often have higher fees to cover their capital investments. However, these ports may offer faster turnaround times and more efficient operations.

2. Labor Costs

Labor costs vary significantly between regions and can have a major impact on terminal fees. Ports in high-wage countries typically have higher handling charges.

3. Port Congestion

Busy ports may implement surcharges during peak periods to manage congestion. This can lead to fluctuations in terminal fees throughout the year.

4. Competition

Ports in competitive regions may keep their fees lower to attract more business. Conversely, ports with a monopoly in their area may charge higher fees.

5. Government Regulations

Taxes, tariffs, and regulations imposed by local governments can influence terminal fees. Some ports may have additional charges to cover environmental or security requirements.

The Impact of Terminal Fees on Shipping Costs

Terminal fees can significantly impact overall shipping costs in several ways:

1. Direct Cost Increase

As terminal fees are typically charged on a per-container basis, they directly increase the cost of shipping goods. For high-volume shippers, even small increases in terminal fees can have a substantial impact on total logistics costs.

2. Route Selection

Differences in terminal fees between ports can influence route selection. Shippers may choose longer transit times to utilize ports with lower handling charges, potentially impacting inventory management and lead times.

3. Carrier Selection

Some carriers may have preferential rates at certain terminals due to long-term agreements or ownership stakes. This can impact carrier selection decisions for cost-conscious shippers.

4. Shipment Consolidation

To minimize the impact of terminal fees, shippers may opt for larger containers or consolidate shipments. This can affect inventory management strategies and order fulfillment processes.

Strategies for Managing Terminal Fees

At FreightAmigo, we work with our clients to implement effective strategies for managing terminal fees:

1. Negotiate with Carriers

For high-volume shippers, negotiating terminal handling charges as part of your overall carrier agreement can lead to significant savings. Our Digital Logistics Platform provides the data and insights needed to support these negotiations.

2. Consider Alternative Ports

Evaluate different port options and their associated fees. While a port with lower handling charges may seem attractive, consider the total landed cost, including inland transportation and transit times.

3. Optimize Container Utilization

Maximize the use of container space to reduce the number of containers shipped, thereby minimizing terminal fees. Our Digital Logistics Solution can help optimize your cargo consolidation strategies.

4. Use Bonded Warehouses

In some cases, using bonded warehouses near ports can help defer or reduce terminal fees, especially for cargo that requires transshipment or consolidation.

5. Stay Informed

Keep track of changes in terminal fees and port policies. FreightAmigo’s Digital Platform provides up-to-date information on port charges and market trends to help you make informed decisions.

How FreightAmigo Can Help

As a full-service Digital Logistics Platform, FreightAmigo offers several tools and services to help manage the impact of terminal fees on your shipping costs:

• Real-time rate comparisons across multiple carriers and routes, including terminal fees
• Data analytics to identify cost-saving opportunities in port and carrier selection
• Consolidation tools to optimize container utilization
• Expert support for negotiating carrier contracts and terminal agreements
• Customized reporting on terminal fee trends and benchmarks

Conclusion

Terminal fees are an integral part of ocean freight costs that require careful consideration in supply chain planning. By understanding how these fees are calculated and implementing strategies to manage them, shippers can significantly reduce their overall logistics costs.

At FreightAmigo, we’re committed to providing our clients with the tools, data, and expertise needed to navigate the complexities of global shipping, including terminal fees. Our Digital Logistics Platform empowers shippers to make informed decisions, optimize their supply chains, and stay competitive in an ever-changing market.

To learn more about how FreightAmigo can help you manage terminal fees and optimize your shipping costs, contact our team of logistics experts today.

References

Drewry Shipping Consultants, “Container Freight Rate Insight”, https://www.drewry.co.uk