Port Charges: An Insider’s Guide + How to Avoid Extra Fees

Every importer, exporter, and shipping company knows the importance of port charges. These fees can add up quickly and significantly impact the overall cost of a shipment. In this insider’s guide, we will go over everything you need to know about port charges and how to avoid or lessen these fees. By understanding the different types of port charges and how they are calculated, you can make more informed decisions for your business and save money in the long run. Let’s go!

What Are Port Charges?

Port charges are the fees levied by port authorities and terminal operators for a variety of services provided at sea and airports. These charges are essential for maintaining the infrastructure, ensuring efficient cargo handling, and covering administrative duties associated with shipping goods internationally. Let’s delve deeper into the various types of port charges you might encounter.

17 Common Port Charges

You’ve probably come across a variety of port fees and charges when shipping goods internationally, but not all of them are considered port charges. Let’s take a look at the most common types of port charges below:

1. Terminal Handling Charge

The terminal handling charge (THC) is one of the major port fees levied by terminal operators. This fee covers the services provided for handling cargo at container terminals, which includes the loading and unloading of containers from the ship to the dock using cranes, and moving containers to a temporary storage location or directly onto trucks, trains, or barges. 

Terminal handling requires substantial coordination, sophisticated machinery, and skilled labor, all of which contribute to the cost. Different ports may have varying charges based on local labor costs, the efficiency of operations, and the equipment used.

2. Goods Due

Goods Due, commonly referred to as wharfage, is charged for both the movement and storage of goods within the port premises. This fee is generally based on the weight, volume, or number of containers or units being handled. Wharfage fees are essential for the maintenance of the port infrastructure and for covering the cost of moving goods from the ship to the port’s storage area and then onto the connecting transport. The rate is often set by port authorities and can vary based on the type and volume of cargo.

3. Booking Fee

The booking fee is charged by shipping lines to secure a spot for containers on a specific vessel voyage. This fee is pivotal in peak shipping seasons or on popular routes where space on ships can be limited. By paying a booking fee, shippers ensure their cargo is prioritized and has a reserved place on the ship, reducing the risk of being bumped to a later voyage due to overbooking.

4. Port Storage Charges

Port storage charges are applied when containers are not picked up from the port within the allotted “free time.” Each port offers a specific period—usually several days—during which stored containers incur no charges. After this period, daily storage fees are charged based on container size and the duration of storage. These fees are meant to incentivize the timely pickup of cargo and help manage limited space in the port.

5. Depot Handling Charges

These charges are incurred at inland container depots or terminals, where containers are often sent post-discharge for storage or before being loaded onto ships. Depot handling charges cover the cost of moving containers within the depot, temporary storage, and sometimes additional services like cleaning and minor repairs.

6. Container Demurrage Fees

We know you are familiar with demurrage fees. After all, the amount of detention and demurrage collected in 2023 was 86 percent higher than that in 2020– so you’ve probably run into it recently. Demurrage and detention fees apply when containers remain in the port terminal beyond the free storage period allowed after their discharge from the vessel. These fees serve as a penalty to encourage the timely pickup of containers and help ports manage space efficiently.

Learn more about demurrage and how to avoid it by checking out our blog!

7. Early/Late Arrival Charges

Ports operate on strict schedules to manage the flow of goods efficiently. Containers arriving earlier or later than their scheduled time can disrupt operations, leading to additional handling and storage costs. Early/late arrival charges compensate the port for the inconvenience and additional logistical planning required.

8. LOLO Charge 

The lift on/lift off (LOLO) charge is assessed for the specific service of lifting containers on and off maritime vessels using cranes. This charge is typically distinct from other handling fees because it involves specialized crane operations which are critical for maintaining the safety and efficiency of cargo operations.

9. Document Fees

Document fees are imposed by shipping lines, freight forwarders, or terminal operators to cover the costs associated with processing the paperwork required for shipping transactions. This includes bills of lading, shipping instructions, release orders, and other necessary shipping documents.

10. Cancellation Charge

A cancellation charge is levied when a booking is canceled after a predetermined deadline. This fee compensates the shipping line or terminal operator for the potential loss of revenue from reserving space that could have been allocated to another customer.

11. Manifest Fees

Manifest fees are charged for processing the cargo manifest, which lists all the cargo carried on a transport vehicle or vessel. This document is essential for port and customs authorities to verify and track the cargoes entering and leaving the port.

12. Customs Clearance Charges

These fees are related to the customs clearance of containers at ports, covering the costs of inspection, verification, and processing required to ensure that the contents comply with local regulations and are free from prohibited items.

The customs declaration fee is charged for processing the required customs documentation necessary for facilitating international shipments. This fee covers the administrative costs associated with verifying shipment details, ensuring compliance with local and international shipping regulations, and facilitating the legal entry or exit of goods.

13. VGM Fee

The Verified Gross Mass (VGM) fee is crucial for maritime safety. It covers the costs associated with verifying the total weight of loaded containers. Accurate VGM is essential to ensure the stability and safety of the vessel during transit.

14. Plugging Charges

Plugging charges apply to refrigerated containers (reefers) that require continuous power supply while they are in the port area. This fee covers the cost of providing and maintaining electrical connections necessary to keep the cargo at the required temperatures.

15. Environmental Fees

Environmental fees are increasingly common as ports adopt sustainable practices. Environmental fees at ports include emission charges for pollutants like SOx and NOx, and waste disposal fees for managing ship-generated garbage and sewage. Ports also charge for the use of shore power, incentivizing ships to reduce emissions by connecting to local electricity grids. 

Additionally, fees may support water quality initiatives, noise reduction in nearby urban areas, and habitat restoration projects. Some ports implement carbon taxes based on CO2 emissions from ships and port equipment. These fees promote sustainability by internalizing the environmental costs of maritime operations and encouraging cleaner practices.

These fees fund environmental initiatives like air quality improvement, waste management, and water quality maintenance within the port area.

16. Detention Charge

Detention charges are levied when a container is not returned to the designated facility within the laytime agreed upon in the shipping contract. As opposed to a demurrage charge, this kind of charge only occurs when the containers have been removed from the port. However, it doesn’t just apply to imports. Exported containers can get detention charges when you pick up the container to load it, take it offsite, and then don’t return it in the pre-determined time frame. 

Read about the difference between demurrage and detention by checking out our blog!

17. Traffic Mitigation Fee

This fee is imposed to offset the cost of measures taken to reduce traffic congestion within and around the port area, ensuring smoother operations and reducing delays caused by vehicular traffic.

All these fees play a specific role in port operations. While they may seem like additional costs for shippers and carriers, they ultimately contribute to the overall efficiency of the port and help maintain its sustainability. By understanding the purpose behind these fees, businesses can make informed decisions about their shipping options and work towards a more efficient supply chain.

How to Avoid (Or Lessen) Port Charges

We know that no one wants to pay extra fees, especially in the already expensive world of shipping. Here are some tips on how to avoid or lessen port charges:

Optimize Shipping Schedules

Timing is everything in the shipping industry. Aligning your shipping and pickup schedules precisely can save you significant money, particularly regarding demurrage and detention charges. Here’s how you can optimize your schedules:

• Advance Planning: Schedule your shipments to arrive when you know you can unload them. This might mean coordinating more closely with your logistics providers to ensure trucks, staff, and storage are ready when your shipment arrives.
• Buffer Time: Always include a buffer time for unforeseen delays but balance this with the free time provided for container storage at the port to avoid rolling into demurrage charges.
• Real-Time Tracking: Use GPS and RFID technology to track your shipments in real time. Knowing exactly where your cargo is and how fast it’s moving can help you make necessary adjustments quickly.

Avoid Demurrage Fees Specifically

Demurrage fees can be hefty and avoiding them requires specific tactics centered around efficiency and foresight:

• Understand Port Free Time: Every port offers a ‘free time’ period, allowing cargo to be stored without incurring extra charges. Know these periods for the ports you’re using and plan to move your cargo before they expire.
• Clear Documentation: Ensure all your shipping documents and customs forms are accurately filled out and submitted beforehand. Delays in paperwork are common reasons for demurrage charges.
• Prompt Customs Clearance: Work with efficient freight forwarders or customs brokers who can expedite the clearance process. Consider pre-clearance options where paperwork is processed before the cargo arrives.
• Communicate with Your Shipping Line: Sometimes, notifying your carrier about anticipated delays can help them work with you to avoid demurrage charges, either by granting extended free time or prioritizing your containers for unloading.

Negotiate with Shipping Lines

Establishing a strong rapport with shipping lines can lead to better financial terms and flexibility, especially concerning fees like booking and cancellation charges:

• Volume Discounts: If you’re a frequent shipper, use your volume as leverage to negotiate lower rates. Shipping lines are more willing to offer discounts to retain loyal customers.
• Contract Terms: Negotiate terms that are favorable, like extended free days for storage, lower booking fees, or waived cancellation charges in specific circumstances.
• Relationship Building: Regularly engage with your contacts in shipping companies. Strong relationships can lead to informal benefits like leniency in fee enforcement or last-minute space on ships.

Understand Local Regulations

Each port operates under a set of local laws and regulations which can directly affect port charges:

• Stay Informed: Regular updates on port regulations and fees can help you anticipate changes in port charges and adapt your shipping strategies accordingly.
• Local Expertise: Engage local agents or consultants who understand the nuances of the ports you are using. Their insights can help you navigate local regulations efficiently.

By adopting these strategies, companies can not only manage but also potentially reduce the port charges they incur.

Use Technology

Implementing the right technology can provide a significant advantage in managing port charges:

• Disbursement Accounting Systems: These systems track your expenses related to shipping, including all port charges. For instance, a robust system can help you identify patterns in your spending, forecast future costs, and pinpoint areas for cost reduction. Check out our blog on the benefits of disbursement accounting software.
• Container Management Software: Software that helps manage container movement, storage, and retrieval can drastically cut down the time containers spend in ports.

Final Thoughts on Port Charges

Effectively managing port charges is more than a financial necessity—it’s a strategic imperative. At Base, we understand the complexities and challenges of port charges and that’s why we’ve developed software specifically to help people like you streamline their financials and increase their transparency.

Our advanced software platform allows for real-time tracking of shipments, optimizing routes and minimizing delays. This not only saves time but also reduces potential fees incurred due to late delivery or storage charges. Contact us today to learn more about how our technology can revolutionize your shipping operations.

Frequently Asked Questions