Shipping & logistics

Freight (freight rate)

The price paid to the carrier for moving goods. Container freight is priced per box (e.g. USD per 40’HC), bulk freight per tonne (USD/mt), and chartered ships by daily hire (USD/day). Surcharges can be added to the base rate: bunker (BAF), currency (CAF), terminal handling (THC), congestion and war-risk surcharges. Freight markets are volatile and are tracked through indices such as Drewry, Freightos (FBX) and the Baltic Dry Index (BDI).

Related terms

Full container load (FCL) and less than container load (LCL)

With FCL a whole container is dedicated to one shipper’s cargo: it is stuffed and sealed at the factory and opened at the buyer’s warehouse. With LCL small lots from several shippers are consolidated in one container at a consolidator’s warehouse and charged per cubic metre or tonne, whichever is greater. In raw material trade FCL is usually cheaper and safer above roughly 10–15 m³; LCL suits samples and small orders.

Charter party (C/P) C/P

The contract between a shipowner and a charterer governing the use of a ship. Under a voyage charter a specific cargo is carried between named ports at a freight per tonne; under a time charter the ship is hired for a period at a daily rate; under a bareboat charter it is leased without crew. Standard forms include GENCON, NYPE and ASBATANKVOY. Bulk sales contracts should be drafted so that loading rates and demurrage terms are back-to-back with the charter party.

Bunker adjustment factor (BAF)

A variable surcharge that carriers add to the base freight to pass on fluctuations in ship-fuel (bunker) prices. It is usually revised quarterly or monthly in line with VLSFO prices in Singapore and Rotterdam. BAFs rose markedly after the IMO 0.5 % sulphur cap took effect in 2020; always ask whether a freight quote includes BAF.

Cost and Freight CFR

Used only for sea and inland-waterway transport. The seller loads the goods on board at the port of shipment and pays freight to the named destination port, but risk passes to the buyer when the goods are on board at loading, exactly as under FOB. The buyer therefore carries the transit risk and should arrange its own cargo insurance. Prices are quoted with the destination port, e.g. “CFR Iskenderun”.

Explained in the trade handbook

Trade handbook