What you need to know about ocean freight

From cars to coal to foodstuffs, most goods that people use and rely on nowadays arrive at their doorsteps via ocean freight shipping. While it is true that there are other methods of transporting cargo, such as via truck, air, or rail, when it comes to moving vast quantities of goods, ocean freight shipping is still the number one choice. In fact, according to statistics, ocean freight shipping is the transportation for 53% of US imports and 38% of US exports. With the world becoming more globalized than ever before, any business that wishes to get its hands on international trade needs to use ocean freight to some degree. 

As such, for businesses that are starting to navigate the world of ocean freight shipping and even FCL logistics, it is important to have some understanding of the industry. With so many terminologies and shipping methods, it can be challenging to untangle everything regarding ocean freight. That being said, we have provided some information so that you have an idea of what ocean freight consists of, and whether it is the best option for your business. 

What is ocean freight?

Simply put, ocean freight is just the method of transporting shipments on boats across the sea. It is a major method in allowing cross-border trade so people can transport their goods between various countries. It is generally considered a lot more economical when compared to other methods like air freight, especially if the cargo weighs more than 200 kg. There are many different shipping options available, with the most common and popular being container shipping, otherwise called containerization. This means goods are transported using standardized containers, usually 20 to 40 feet long.

Types of ocean freight 

As mentioned earlier, container shipping is one of the most popular options for ocean freight. This is mainly due to it being relatively easy and safe to handle. Because containers are standardized, they can be moved, and stacked easily without disturbing or damaging the items being shipped. However, containers tend to only be suitable for transporting certain types of goods, like dry or packaged cargo. 

More specifically, when it comes to container shipping, there are two shipping methods businesses can pick. FCL or LCL. FCL means full container load. As its name suggests, a cargo shipper will purchase or rent an entire container to exclusively ship their goods in. This means the delivery will be shorter, as the container can travel directly to its final destination without needing to be unloaded and handled often. As such, this shipping method makes the most sense when you have enough goods to fill or almost fill a container, or if your goods are fragile to transport. 

On the other hand, with LCL shipping, a single container will be shared with multiple shipments. So, this is generally for shippers who have fewer goods to transport or have a small production line (think e-commerce businesses). While it may seem slightly cheaper at first glance, the cost per area is actually more expensive than FCL! Additionally, your goods may also be more vulnerable to loss, damages, or theft, as there will be multiple stops and handling procedures during the shipping journey. LCL is also slower when compared to FCL, so pick this option if the goods you are transporting do not need to arrive at their destination urgently. 

How to ship 

In order to get started with shipping, you must understand that ocean freight mainly relies on third-party services called freight forwarders. These third-party companies or individuals help to pick up your goods, arrange for them to be loaded onboard, and then correctly delivered to their final destination. Another thing to keep in mind is the shipping contract. In fact, there are standard international shipping terms that are used in ocean freight contracts and are also called Incoterms. The contract will define how far along the shipping process will the seller be held responsible for the cargo, and at which point the buyer will take over the liability for the shipment. 

Other incoterms to know are:

• FOB (Free on Board): Under this agreement, buyers and sellers will share the responsibility of the delivery process. The seller will take on the obligation to make sure the goods are packaged, labeled appropriately, and loaded correctly onboard. Once the cargo has been loaded, the obligations will then transfer to the buyer. 

• EXW (Ex Works): The places the majority of the responsibility onto the buyer. The buyer will be the one who picks up the goods and is responsible for the good’s transit to their final destination.

• DDP (Delivered Duty Paid): Here, the seller will take on the maximum obligations. This means that the seller will be mainly responsible for the cost of shipping, in addition to insuring the goods as well as inland transportation. 

The pros and cons of ocean freight

Ocean freight is extremely popular and useful in today’s interconnected world and has both its unique advantages and disadvantages. Here are a few of the benefits of ocean freight: 

• Cheaper cost: On the whole, ocean freight is a lot cheaper when compared to other shipping options like rail or air freight. On average, it costs around 50 cents per kg. Compare this to standard air freight, with costs around $4 per kg, with express costing around $6. 

• Fewer restrictions: When you ship things by air freight, you may have noticed that there are several restrictions relating to the type of goods you can transport by air. For example, you cannot ship flammable or hazardous products like perfumes, or some types of medicines. On the other hand, ocean freight has fewer restrictions, and it can allow you to ship certain flammable goods. 

• Lower carbon footprint: Compared to air freight, ocean freight tends to produce fewer carbon emissions, making it a more environmentally friendly option. In fact, new regulations coming from the International Maritime Organization are set to reduce these emissions even further! 

With all the positives, here are a few disadvantages to keep in mind so you can better decide whether this shipping option is the right one for your business needs.

• Unpredictable shipping: With the sea being a lot more unpredictable, ocean freight is a lot more vulnerable to certain shocks, such as bad/stormy weather, port congestions, or customs delays. These events can add on extra days or weeks to your shipping delivery, meaning some of your goods may not arrive on time. 

• Less protection: Because your goods will be transiting for a longer period of time, they are more susceptible to damages, loss, or theft. Sometimes, people may even wind up misplacing or mishandling your goods. 

• Longer shipping time: Ocean freight is a lot slower than other shipping methods. For instance, air freight usually takes five to six times faster. If you have to ship something between Mainland China and the US, ocean freight generally takes around 30-40 days, whereas standard air freight tends to take only about a week, with the express version sometimes even taking as fast as three days!