Sea or ocean freight shipping is often the first choice of retailers who need to import goods from across the globe.
This is due to its low cost and ability to handle large volumes that airfreight cannot accommodate—as well as facing fewer restrictions on the type of goods that can be transported.
The maritime shipping industry is one of the most important industries in the world, accounting for more than 90% of global commerce. Generally, shipments that weigh more than 100kg, or which consist of multiple cartons, will have to be sent by sea freight.
Sea freight shipping costs have fallen significantly in recent years, and are expected to remain low for the next few years, with cargo ship space outweighing cargo ship demand.
The low price of space on cargo ships means that this is likely to remain a popular way to transport large items for the foreseeable future.
In this article, we'll cover the basics of sea freight shipping, including what it is, how much it costs, and some pros and cons.
Related: Ultimate Guide to Freight Shipping
What is Sea Freight Shipping?
Simply put, sea freight shipping is the process of transporting cargo across the sea in large cargo ships. The cargo is loaded into containers around 20 to 40 feet long that are then put onto the carrier ship.
Once the ship reaches its destination, the process reverses and the containers are taken off of the vessel in much the same way they were loaded in.
The standard cargo ship can usually carry around 18,000 containers. If you need to ship a large number of items, sea freight is an excellent way to do it at a low cost.
The industry is a bit more complex to navigate than other types of shipping, so it's generally best to consult the expertise of an international freight forwarder—at least at first.
The price of sea or ocean freight is largely determined by the size and weight of your shipment. There are also international considerations that may affect the final cost.
For example, importing via sea freight from China is likely to be significantly cheaper than importing the same goods from Australia.
This is because it's much easier to get cargo ships to China, where there are more opportunities for taking on containers, whereas shipping costs will often be higher in Australia because of international politics and trade agreements.
The final cost of sea freight will also be determined by the type of goods you're importing or exporting, and where they need to go.
If your goods need to pass through customs, you'll have to pay import duties on them, which will add to the cost of shipping.
Overall, the price of sea freight shipping will depend on several factors and there isn't a one-size-fits-all calculation for all situations. Find a freight forwarder in your area and ask them for advice about what's best for your situation.
Using a freight calculator might be useful if you're trying to get a ballpark estimate of how much sea freight is going to cost.
It's also important to remember that the price of sea freight is only a small percentage of what you'll pay for importing goods from overseas. In addition to paying for your shipping, you'll have to factor in:
- Value Added Tax (VAT)—a type of tax in many countries
- Duties and tariffs
- Routing charges
- Customs security surcharge
- Fuel surcharge
- Customs brokerage
- Container freight station
Sea freight shipping costs are dynamic rather than static. They depend on several factors that can fluctuate at any time:
- Cost of fuel- If fuel costs go up the rates will reflect the increase.
- Supply and demand for ships- This fluctuates according to certain dates or events like Chinese New Year or the Christmas shopping season.
- International politics- Shipping lines need to know their routes are secure. A good rule of thumb is that, the more open the borders, the better and cheaper the rates.
- Currency exchange rates- The amount of the base rate will be affected by changes in the exchange rate of currencies. Even small changes can be devastating to ocean freight shipping companies given how long a typical single voyage takes.
- The kind of ship required- Containerized ships are cheaper than bulk ships and tankers.
- The number of ports the ship will stop at before docking at your destination port- For example, having three ports to stop rather than two will increase your costs.
Types of Ocean Freight Services
There are four main types of ocean freight services. We go over each below:
Full Container Load (FCL)
FCL shipping involves the purchase of at least one full container to transport your goods.
Purchasing a full container makes it easier to ship your products because you're guaranteed that there's going to be enough space for your cargo.
FCL shipping also means that you don't have to worry about sharing a container with other companies or organizations and finding out later that they've sent more than their allotted share of goods.
In addition to being convenient, FCL shipping is also more likely to be cheaper if your shipment can fill an entire truckload.
Less than Container Load (LCL)
LCL shipping involves the shipment of one or more containers that are less than 100% full of cargo.
When using this type of shipping, you'll share a container with other companies or organizations that are sending goods to the same port.
LCL shipment can be cheaper than an FCL container for small shipments, but there's also a higher risk of your products getting lost or misplaced if they get mixed up with others in the container.
You'll need to watch out for this and ask your freight forwarder to make extra efforts to ensure that your cargo is easily identifiable.
Roll On Roll Off (RORO)
RORO involves the shipment of vehicles and other goods that are driven onto a container ship instead of being placed inside.
The vehicle holding your goods simply drives onto the cargo ship and then off again when its destination is reached.
As you might expect, RORO shipping requires much less time and effort on your part than FCL or LCL shipping does.
The drawback to this type of shipment is that it increases the risk of damage from harsh weather conditions since vehicles are exposed to the elements.
RORO is most commonly used in the shipping of motor vehicles, construction equipment, and other heavy goods.
Dry Bulk Shipping
Dry bulk shipping is used for some specific items, which are deposited into the hold of the ship instead of traveling in a container.
Typically, goods shipped this way have two characteristics: they are homogenous and typically left unpacked.
Some examples of such goods are:
- Animal feed
As you can imagine, goods such as these are often shipped because they cannot be stored in a container and delivered to the destination port.
Since dry bulk shipping takes up so much space and is not suitable for consumer goods, it is often used for bulk shipping of goods to producers and wholesalers.
Dry bulk goods must be kept dry as any moisture can wreak havoc on the entire cargo.
These goods are usually classified as ‘Dangerous Goods’ when transported, requiring special attention during loading, transportation, and discharge to ensure that they don't shift in transit which could cause instability in the ship.
Though freight forwarding companies don't commonly handle dry bulk transport, they can provide you with more information on this type of shipping if your business needs the services of a dry bulk carrier.
Pros and Cons of Sea Freight Shipping
So what are some of the pros and cons of using ocean freight shipping?
The pros of ocean shipping are:
Cheaper than most other shipping options
The average cost of sea freight shipping is just $.50 per kg. This is compared to the average cost of standard air freight, which is around $4 per kg and express air freight, which costs approximately $6 per kg.
Efficient for large-volume, long-distance shipments
Sea freight shipping is perfect for bulky shipments that are being sent over long distances.
You won't have to worry about your shipment taking up too much space in the container because there's no functional limit to how big it can be.
Less harmful to the environment compared to air freight
The International Maritime Organization (IMO) 2020 regulation that took effect in January 2020 requires ships to reduce the sulfur in their fuel to just 0.5% m/m (mass by mass), a reduction from the previous 3.5% m/m.
With less sulfur in the fuel, ocean-going vessels today produce significantly fewer emissions than ever before and thus less carbon dioxide (CO2) and other greenhouse gases.
Fewer restrictions on shipments
There are significantly less restrictions on ocean freight compared to air freight.
For example, flammable products like perfumes and biochemical products like some medicines can't be shipped by air but they can be shipped by sea if your destination will accept them.
The cons of ocean freight shipping are:
Ocean freight is much more vulnerable to unexpected changes in both weather and customs.
You can't plan a shipment route as easily as you can an air route, and your shipment isn't going to arrive any sooner than it's scheduled to.
Port congestion can also play a role in determining how quickly your shipment will arrive.
Longer transit time than other types of transport
Transportation by sea is much slower than that of other transport options like air freight.
Sea freight typically takes 30-40 days, whereas air freight usually takes five to six times less time (1 week), and express air may only take 3 days.
Shipping via ocean freight is less protected than shipping via other transport options.
Since your shipment will be in the container for much longer, it's also more likely to incur damage during transit compared to air cargo.
There's also a slightly higher chance that the cargo may be mishandled or misplaced compared to other transport options.
Fewer security measures are in place for ocean freight transport, so there is a greater risk of theft while the goods are in transit.
This can be avoided by doing business with shippers who have good reputations and track records—but it's something else to consider when deciding between ocean freight and other options.
How Sea Freight Shipping Works
The sea freight shipping ecosystem is propped up by third-party service providers called freight forwarders.
What freight forwarders do is pick up your goods at the seller and properly arrange them to be loaded for shipping.
This may sound like a lot of responsibility but it's just part of what freight forwarders do for you in terms of logistics management. They can also help arrange other aspects of transportation, such as customs clearance and delivery.
Before shipping something by sea, a shipping contract is drawn up between the buyer and the seller of the goods.
This agreement sets out all of your responsibilities as well as those of everyone involved in terms of insurance, payment, and more.
The contract, called "incoterms", is short for international commercial terms. They're a set of standard international trade terms that define how far along the process you will be held responsible for your shipment and at what point the buyer takes over liability for it.
Incoterms can help reduce confusion and costly mistakes when it comes to shipping goods by sea.
There are three common incoterms used in the industry:
- Free on Board (FOB)- When a buyer and seller agree to use the FOB incoterm, the seller is responsible for packing, labeling, and loading the goods onto the vessel ready for shipping. Once the goods are loaded, the responsibility is then transferred to the buyer. The main advantage of using FOB is that it limits the liability of both parties. However, before committing to this agreement, both parties should be aware of the risks that come with it, and whether each is prepared for their responsibilities.
- Ex Works (EXW)- When a buyer and seller agree to use the EXW incoterm, they're both agreeing that the responsibility of getting the goods ready for shipping is chiefly with the buyer. They're also acknowledging that no loading or transportation is included as part of the agreement—the buyer is responsible for that. The buyer handles the packaging and shipment of goods from the seller's location to their own. The main advantage of using EXW is that it minimizes the seller's risk, as the buyer shoulders the responsibility of getting the goods from point A to point B.
- Delivered Duty Paid (DDP)- In this incoterm, the responsibility falls completely with the seller. The seller will be responsible for the costs of shipping, insuring the items, and delivering them inland. The buyer is freed from financial liability until the goods reach their final destination. This can be useful for companies that want to cut costs by not paying the additional fees, taxes, and duties involved with moving items across borders.
No matter which incoterm you choose, it's important to always establish an open line of communication with your buyer and freight forwarder so that everyone involved is clear on the process.
Once everything is set and agreed upon, then your shipment can begin its journey to its final destination.
There are seven stages involved in the process of shipping by sea. We tackle them in order:
- Export haulage- This is when the freight forwarder will arrange to have all of your shipments picked up from their current location and brought to a nearby port or seaport for transport overseas.
- Export customs clearance- The first step in dealing with export customs is having an idea of what items you're shipping, where they're going, and if there's any special information about their contents required by customs. Customs will provide you with documents to fill out and return. These documents may include the commercial invoice and the packing list, both of which must be completed accurately before any goods can leave your country. The commercial invoice is a detailed list of what's in the shipment and how much it costs—it also includes information about where items are going and who they're being shipped by (the buyer). The packing list is a detailed list of each package’s weight and dimensions, how it’s packed, identifying marks, and other information crucial for its retrieval.
- Origin handling- This stage encompasses all the steps needed to prepare your shipment for travel. It's when your goods will be put in a staging area for inspection and confirmation. Once your shipment is approved, you'll be issued a cargo receipt confirming the details of your shipment. The freight forwarder will look out for any issues with packaging, documentation, and more to fix them before moving on to the next stage. FCL shipments will be stowed in their containers while LCL shipments will be consolidated with other goods in a warehouse before being loaded into a truck headed to the port.
- Ocean freight- This refers to the travel portion of the process, which takes anywhere from 20-60 days depending on where your goods are headed.
- Import customs clearance- The importing country's customs office will process all shipments coming into their country, so you should check with them about any special documentation or requirements for the goods in question so that they can help facilitate a smooth process for you.
- Destination handling- Some final paperwork will need to be completed at this point before your items are given to you. Documents like the bill of lading and commercial invoice should be ready for review. Your shipment will also need to be checked over to confirm all the details are accurate. After they are opened and checked, your shipment will then be ready to be sorted for haulage.
- Import haulage- At this stage, the freight forwarder will determine who is responsible for getting your shipment out of the port. Once everything is clear, the goods will be ready for delivery to your final destination.
Freight forwarders can be charged with making sure everything goes smoothly from beginning to end, but this will come with added costs.
You can take charge of certain stages in the process to save some money, but you might need to hire extra labor to make things go swiftly.
Once you've gone through the entire process and safely received your goods you can use this information moving forward.
If you ship frequently, you should understand how other types of freight and shipping affect the sea or ocean portion, like air transportation. You'll also want to know what other documents and fees may be involved along the way as well as who's responsible for completing them.
Understanding the sea or ocean freight shipping process is one of the most essential parts of shipping internationally.
Knowing what to expect and who is responsible for each step will help you control your shipment, save money, and ensure a smooth delivery.