Not only have the regional pattern of freight rates become more
diverse, but their structure has become more complex over the
years. The shipping lines provide customers with quotations for
base rates. In some markets, such as East Asia, the base rate may
actually include some surcharges, such as the Terminal Handling
Charges (THC), the Bunker Adjustment Factor (BAF) and the Currency
Adjustment Factor (CAF) as part of an ‘all-in’ rate. In the case
of North America the ‘all-in’ rate includes land transport costs to
the final destination under carrier haulage terms. In other markets
these costs are charged separately from base rates. Increasingly,
however, other surcharges are being added, whose scope, magnitude
and temporal validity are highly differentiated, and whose
numbers are increasing. The total freight rate charged to the customer,
therefore, is now much higher than the simple base rate.
The scale of surcharges is indicated in Fig. 1. As will be explained
later, there are markets where the surcharges account for more
than 100% and indicate that base rates were in fact negative. The
surcharges are determined by a wide range of factors, some specific
to the ports of loading or discharge, others to general economic
factors beyond the control of the shipping lines or the
customer.