Why Ocean Freight Has So Many Add-Ons: THC, BAF, LSS and CAF Surcharges Decoded

When a quote arrives, ocean freight (O/F) is a single line, but below it comes a string of three-letter charges like THC, BAF, and LSS. Add them all up and the surcharges often exceed the pure ocean freight itself. Without knowing what these items are, you cannot compare quotes or judge where to negotiate.

Why Surcharges Are Billed Separately

The base ocean freight (O/F) a carrier charges is purely the value of moving a container from the origin port to the destination port. But actual shipping carries costs that shift constantly by timing and route: fuel, currency, terminal handling, documentation, and port security. Rather than fold these into the base rate, carriers strip them out as separate surcharges. That way, when fuel or currency rises, they can pass on the cost without renegotiating the base freight contract.

So surcharges are many, and they appear and disappear with the market. But most fall into the four groups below.

1. Fuel and Currency Surcharges

These reflect external price swings in the freight. Shippers cannot control them, and carriers publish them periodically.

• BAF (Bunker Adjustment Factor): a surcharge that compensates for changes in the price of bunker fuel. It rises as fuel prices rise.
• LSS (Low Sulphur Surcharge): after the IMO's 2020 sulphur cap of 0.5%, carriers switched to more expensive low-sulphur fuel, and this item passes on that added cost.
• EBS (Emergency Bunker Surcharge): a temporary fuel surcharge applied when fuel prices spike faster than BAF can capture. It is sometimes route-specific.
• CAF (Currency Adjustment Factor): a surcharge that offsets losses when the exchange rate of the currency the freight is priced in fluctuates.

These four differ mainly in name. All are mechanisms to reflect the uncontrollable variables of fuel and currency in the freight.

2. Terminal and Port Costs

These are the costs of handling cargo at ports and terminals. They arise at both origin and destination.

• THC (Terminal Handling Charge): the cost of bringing a container into the terminal and loading it, then unloading and releasing it at the destination. It splits into origin THC (OTHC) and destination THC (DTHC), so a single shipment carries both. Amounts vary by country because port costs differ.
• CFS Charge (Container Freight Station Charge): the cost of consolidating a less-than-container-load (LCL) shipment with other shippers' cargo into one container, or splitting it at destination. It applies to LCL only.
• Wharfage: a fee paid to the port authority for using wharf facilities.
• ISPS (security surcharge): passes on port security costs under the international ship and port security code.

The terminal costs you face depend on whether you choose LCL or FCL. The criteria and cost comparison are covered in Ocean freight: LCL vs FCL.

3. Documentation and Administrative Fees

These are the costs of issuing shipping documents and filing advance declarations with each country's customs.

• DOC (Documentation Fee): a fee charged when issuing shipping documents such as the bill of lading (B/L). The types and roles of the bill of lading are covered in Bill of lading (B/L) types.
• AMS / ENS / AFR (advance manifest filing fees): the United States (AMS), Europe (ENS), and Japan (AFR) require cargo information to be filed with customs before loading. These are the fees for that filing, and they apply only when shipping to those regions.

4. Market and Demand Surcharges

These apply when the supply and demand for vessel space swings. Being market-driven, they move the most.

• CIC (Container Imbalance Charge): passes on the cost of repositioning empty containers when a region runs short and they must be hauled in from elsewhere.
• PSS (Peak Season Surcharge): applies when space is scarce during the high-volume peak season.
• GRI (General Rate Increase): an across-the-board increase to the base freight on a particular route. Strictly a rate increase rather than a surcharge, but you meet it as a rising element in the quote.

Surcharges at a Glance

Who Pays: Incoterms Decide

Even for the same surcharge, whether the seller or buyer bears it depends on the agreed Incoterm. Under FOB, for example, the seller bears costs up to the origin and the buyer bears the rest. But which side pays origin THC often varies by custom and contract, making it a frequent point of dispute. Where cost and risk transfer under each term is covered in the Incoterms 2020 guide.

The key is to check whether a "cheap-looking quote" has left the surcharges out. A quote that shows only a low base freight and bills THC, BAF, and DOC separately can end up more expensive. When comparing quotes, look at the all-in cost with surcharges included.

Surcharges Are Not Late-Return Penalties

Demurrage and detention are often confused with surcharges. These two are penalties charged when a container is released or returned late, beyond the free time allowed, and are different in nature from the surcharges attached to shipping itself. Surcharges apply even to a normal shipment, but demurrage and detention can be avoided by preventing delay. The criteria are covered in Demurrage vs detention.

This guide is for general information. The composition and rates of surcharges vary constantly by carrier, route, and market, so confirm the all-in cost when requesting an actual quote.