Port charges and their role in the small business budget

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The transportation of goods incurs multiple different fees which can add up and represent quite a cost to the company. It is important to research these costs from the outset and factor them into your billing structure so that they can be easily absorbed. Let’s look at port fees and consider how they may affect your business.

What are the port charges?

Port fees are essentially the charges that ports pass on to transport carriers (boats or ships in this case) to cover the cost of maintenance and operation. There seem to be three main categories of port charges including cargo dues, tonnage dues and port dues.

Cargo dues are charged to any vessel bringing cargo through the port. These are usually published year by year in advance and so can be budgeted for and costed into your sale price to the customer so the company does not have to cover them.

Tonnage dues are charged in relation to the weight of the vessel and are for maintenance of port services such as moorings, buoys and harbour ways. Port dues are time and weight-based and as such are charged to all vessels based on their tonnage and the exact amount of time they spend moored in the port.

How do they affect your business?

Well, as with any transportation cost, they need to be factored in to avoid hefty, unexpected bills later. Transportation costs by nature can be quite changeable and therefore difficult to predict and invoice the customer for. It is imperative to cover the cost however so ideally they should be either billed to the customer when they pay for shipping or else better still, factored into the original sale price of the item. Some of these port charges are published year by year and so prediction, budgeting and invoicing can all be done with relative confidence.

The most uncertain component of port charges is the tonnage cost where the charge is based on weight of the vessel. Although it is impossible to know the total tonnage of shipping unless your company solely operates or utilises a ship for cargo, you could investigate a reasonable cost per kilogram for example, and then use the information and factor it in the sale of price of the item.

Port dues take into consideration the length of time a vessel stays in port, utilising space and resources. This could present the company with an opportunity to save money if cross-docking was used – this is where the items from a shipment are offloaded simultaneously as new ones reloaded so as to avoid storage costs and, importantly, the time spent in port. This may also represent a significant area for improvement.

It is important to research all the different charges your company could be exposed to through different modes of transportation. Once you have undertaken cost analyses which are inclusive of every potential cost, it may be financially beneficial to ship using a more expedited mode such as air rather than sea. However, even with air transportation there could be levies charged to transport companies to support the upkeep of airports and cargo lines, although the benefit of expedited shipping may offset these costs.

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Melanie - Unleashed Software

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.

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