Container shipping surcharges explained: BAF, CAF, PSS, THC and the rest
Base ocean freight is rarely half the invoice. Every major surcharge on a container shipment, what triggers it, who is allowed to charge it, and which ones you can reasonably challenge.
Key takeaways
- Comparing carriers on base ocean freight alone tells you almost nothing — compare all-in figures for the same Incoterm, box type and pair of terminals.
- Container shipping surcharges split into formula-driven ones (bunker, currency, carbon) and discretionary ones (peak season, rate increases, congestion, equipment imbalance). Only the second group is open to argument on principle.
- For a formula-driven charge, ask for the index, the formula and the reset window. For a discretionary one, ask what triggers it and what removes it.
- Your Incoterm decides which end’s charges land on you; mismatched assumptions are a common cause of double billing.
A carrier quotes 1,850 US dollars per 40′ high-cube Shanghai to Rotterdam. Another quotes 1,790, and on volume that 60 dollars decides the tender. Then the invoices arrive. The cheaper carrier bills origin terminal handling separately, charges documentation per bill of lading rather than per booking, and still runs a peak season surcharge the first carrier withdrew three weeks ago.
That is the normal condition of ocean freight pricing. The base rate is what carriers compete on publicly; the surcharges carry much of the real cost, reset on their own clocks, and are disclosed with very different levels of detail. Understanding container shipping surcharges is less about memorising acronyms than about knowing which lines have arithmetic behind them.
Why base freight alone is a poor comparison
Three things break a base-rate comparison. Coverage differs: one number may exclude terminal handling at both ends, another may include the origin side. Surcharges reset on their own schedules, so a quote given on the 28th can be overtaken by a bunker reset on the 1st. And the unit varies — per container, per bill of lading or per shipment — so six boxes on one B/L price differently from six bookings.
Benchmarks share the problem: a spot index may be all-in or base-only depending on the publisher, which is why reading a container freight rate index correctly starts with knowing what it includes.
Fuel and currency adjustments
The bunker adjustment factor (BAF) passes marine fuel cost through separately from the base rate. Most major carriers publish a formula: a fuel price reference for the relevant bunkering ports, a trade-specific consumption figure per container, and a utilisation assumption. Reset is normally monthly or quarterly, with a lag before the effective date. Some brand it a bunker recovery charge; the acronym differs, the mechanics do not.
Low-sulphur fuel is the variant worth separating. Compliant fuel costs more than the residual fuel it replaced, and carriers recover the difference inside the BAF or as a distinct low sulphur surcharge (LSS). Check you are not paying both. It sits immediately under base freight on the invoice.
The currency adjustment factor (CAF) covers exchange-rate exposure where the rate is quoted in one currency and costs incurred in another, as a percentage of base freight. It has thinned out on major east–west trades as more business is quoted in dollars end to end, but persists wherever a local-currency tariff applies.
Demand-driven surcharges
These have no formula. They exist because the carrier judges the market will bear them.
A peak season surcharge (PSS) is a temporary uplift applied when demand is expected to outrun capacity — historically the pre-Christmas and pre-Lunar New Year rushes, though it now appears whenever space tightens. A general rate increase (GRI) differs in kind: it lifts the base rate itself, is typically announced two to four weeks ahead, and is often only partly implemented. An equipment imbalance or repositioning surcharge covers moving empties back to a deficit region, and bites hardest on backhaul-heavy lanes.
All three are discretionary, and all three belong in the contract rather than at invoice stage — see which ocean freight contract clauses matter more than the rate.
Terminal, port and security charges
Terminal handling charges (THC) cover the terminal’s work: the lift on and off the vessel, the yard move, a short free storage period. They apply at both ends, vary by port rather than carrier, and are often the largest single surcharge on a short-sea booking. ISPS or security charges recover port facility security costs under the International Ship and Port Facility Security Code — small, fixed per container, non-negotiable. Port dues and wharfage pass through what the port authority bills.
Congestion surcharges are the outlier: discretionary, applied per port and per direction, and slow to come off once the delay that justified them has eased. Before accepting one, check the port yourself — Port Watch berth waiting and yard utilisation data shows whether the condition being charged for still exists.
Incoterms decide who pays which end
Nothing in the tariff determines who bears origin versus destination charges — the Incoterm does. Under FOB the buyer takes ocean freight and the destination end, the seller origin THC and export documentation. Under CIF the seller carries freight to the discharge port, but destination THC usually still falls to the buyer. Under DAP or DDP the seller carries nearly everything.
Documentation, admin and cargo-specific charges
Documentation charges are small individually and add up fast. A bill of lading fee is charged per document; AMS, ENS and equivalent advance manifest filings are charged per filing, mandatory on those trades; a telex release fee applies when originals are surrendered at origin. Amendment fees for a corrected B/L are where carriers earn real money from administrative error. All are fixed-tariff lines low on the invoice.
Cargo-specific charges attach to the box, not the lane. Out-of-gauge cargo is priced on the slots it blocks, so a flat rack overhanging both sides can cost several times a standard box. Hazardous cargo carries a class-dependent surcharge and sometimes a stowage restriction. Overweight surcharges apply above a threshold set by port and inland leg. Reefers carry plug-in, monitoring and pre-trip inspection charges on top of a higher base rate — part of why reefer container rates move on a different clock.
Environmental charges are now their own group. The EU Emissions Trading System has covered maritime transport since 2024, and the resulting surcharge varies widely between carriers on identical lanes; auditing an EU ETS and FuelEU surcharge is its own exercise.
Which surcharges you can actually challenge
| Surcharge | What it covers | What drives it | Typically negotiable? |
|---|---|---|---|
| BAF / LSS | Marine fuel, including the low-sulphur premium | Formula on a fuel price index | Not the level; yes the formula and lag |
| CAF | Exchange-rate exposure on the quoting currency | Percentage of base freight | Often removable by quoting in one currency |
| PSS | Temporary demand peaks | Carrier judgement of market tightness | Yes — cap or exclude in contract |
| GRI | An increase to base freight itself | Carrier judgement, announced ahead | Yes, and often only partly implemented |
| Equipment imbalance | Repositioning empty containers | Directional trade imbalance | Some, on committed volume |
| THC (both ends) | Terminal lift, yard moves, free storage | Terminal tariff at that port | Rarely the amount; yes which side pays |
| ISPS / security | Port facility security compliance | Fixed per container by port | No |
| Congestion | Delay at a named port | Carrier judgement of port performance | Yes — ask the trigger and removal condition |
| Documentation / filings | B/L issue, manifest filings, releases | Fixed per document or filing | Small scope; waivable on volume |
| Cargo-specific | Out-of-gauge, hazardous, reefer, overweight | Slots blocked, class, power, monitoring | Some, if presentation can change |
| EU ETS / emissions | Carbon allowance cost, EU-linked voyages | Allowance price, emissions, voyage scope | Not the principle; yes the calculation |
What matters is the difference between a charge with arithmetic behind it and a charge that is simply a price. For the first, do not argue that it should not exist — ask for the formula, the index it references, the consumption assumption and the reset period. A carrier that will not disclose those is telling you something. For the second, the argument belongs in the tender, backed by volume and a competitor not charging it.
Watch the reset lag
A bunker factor set on a price window that closed six weeks ago keeps charging a high fuel price long after bunkers have fallen — and lags on the way up too. When fuel moves fast, the lag matters more than the formula. Ask for the window dates, not just the frequency.
What to put to your carrier
- Give me the all-in, itemised. Stated Incoterm, every line named, with the unit each is charged on.
- Which of these are formula-driven? For each: the index, the formula, the reset frequency and the window dates.
- Which are in force but time-limited? Get the withdrawal condition for any PSS or congestion surcharge in writing.
- What is frozen for the term? Agree which surcharges are fixed, which float on a named formula, and which may appear mid-term.
Then check the answer against the market. Your all-in figure beside the spot and contract benchmarks in the rate explorer is the only comparison that means anything once the surcharges are counted.
Frequently asked questions
What is BAF in shipping?
BAF stands for bunker adjustment factor: a surcharge that passes the cost of marine fuel through to the shipper separately from the base ocean freight. Most carriers calculate it from a published formula combining a fuel price reference, the trade lane’s fuel consumption per container and a utilisation assumption, then reset it monthly or quarterly.
Because it is formula-driven, BAF is one of the surcharges you can reasonably ask a carrier to show its working on.
Are terminal handling charges negotiable?
Rarely on the amount, sometimes on who pays. Terminal handling charges reflect what the terminal bills the carrier for lifting, moving and storing the box, and the carrier’s published tariff usually tracks that closely. What is genuinely negotiable is whether origin THC sits inside your all-in rate or is invoiced separately, and which party carries the destination end — that is decided by your Incoterm and your contract wording, not by the terminal.
What is the difference between a GRI and a peak season surcharge?
A general rate increase (GRI) raises the base freight itself, permanently until the next move; a peak season surcharge (PSS) is a temporary add-on layered on top of an unchanged base rate. Both are demand-driven and discretionary. The practical difference is what happens when demand falls: a PSS is designed to be withdrawn, while a GRI has to be given back through a fresh negotiation.
Why is my ocean freight invoice so much higher than the quoted rate?
Because the quoted rate was almost certainly base ocean freight only. On a typical port-to-port booking the surcharges — bunker, currency, terminal handling at both ends, security, documentation and any cargo-specific charges — can add up to a sum comparable with the base rate itself. Ask for an all-in quotation with every line itemised, on a stated Incoterm, before you compare two carriers.
Do I have to pay a congestion surcharge?
If it is in the carrier’s published tariff and your contract does not freeze surcharges, generally yes — but it is one of the more challengeable lines. Congestion surcharges are discretionary, applied per port and per direction, and they are often left in place after waiting times have normalised. Ask what berth-waiting threshold triggers it and what triggers its removal, and check the port’s current performance yourself.