The cost of shipping inventory can be significant – depending on your market position, your business may bear the transportation costs for inbound materials, outbound finished goods or even both. Although it is worthwhile understanding what factors affect transportation costs, port charges can be particularly difficult to understand.
What are port charges?
Port charges are the fees that shipping operators and their customers pay to port authorities for the use of the port’s facilities and services. Port charges can be a significant component (up to several percent) of the final price of consumer goods. There are many different port charges, although some of the most common fees are ship dues, goods dues and, in the case of mixed-use or passenger ships, passenger dues.
Ship dues, also known as port dues or docking dues, are levied by the port on all ships that enter the port. Ship dues are generally intended to cover the cost of port infrastructure, including berths, channel lighting and pilotage. Ship dues also reflect the scarcity of space at many ports.
Although each port will have its own methodology for calculating ship dues, the amount payable is likely to be determined by reference to the gross or net registered tonnage of the ship in accordance with the ship’s tonnage certificate. The time that the ship spends in port will also be relevant, as may be the nature of the voyage – vessels travelling to or from a foreign port may sometimes be charged higher dues than domestic carriers.
Ports may charge specific dues for a given time period (e.g. two days) as well as a daily rate if a vessel needs to stay at the port longer (for example, for repairs or to shelter from a storm). Discounted port charges may be granted to operators that regularly use a port or vessels that are only calling in for limited purposes.
These charges are levied on goods that are loaded or unloaded as well as on goods that are transferred between ships. These charges are typically paid by the customer, rather than by the shipping operator. Goods dues may vary between ports, but rates are typically set on the basis of weight, volume or number and nature of goods. For example, liquids or dry matter may be charged on a volume basis, palletized cargo on a tonnage basis, and vehicles and livestock on a per unit basis. Additional dues may be charged for dangerous cargo.
How port charges affect shipping decisions
As port charges may vary between ports, businesses may find that certain ports provide better rates for a given service level and type of shipment. For example, a business that primarily ships palletized cargo may preferentially ship to and from ports that have low tonnage rates relative to other goods dues.
That said, customers often look beyond a port’s current tariffs and instead consider the stability of a particular port’s charges. An experienced exporter is unlikely to switch ports on the basis of a short-term decrease in goods dues, only for the price to increase months later. Road and rail transport costs to and from ports are also relevant – lower port charges may need to be balanced against the availability of rail routes as well as the price of overland transport.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.