Ocean freight surcharges are the charges added on top of base ocean freight — BAF, CAF, THC, LSS, ISPS, GRI, PSS, and more. Most quotes include five to eight of them. If you don't know what each one covers and how it's calculated, you're either underquoting customers or padding margins unnecessarily. This guide explains every major surcharge, how it's computed, and how to model it correctly in your pricing.
Why do ocean freight surcharges exist?
The base ocean freight rate (also called "ocean freight" or "OF" on a rate sheet) covers vessel slot costs alone — the cost of moving a container from port A to port B on the ship. Everything else — fuel volatility, port handling, security compliance, currency risk — is recovered through surcharges.
Carriers first introduced separate surcharge lines in the 1970s during the oil crisis. The practice has expanded significantly since. Today, a typical FCL invoice from port to port has 6–10 line items. A freight forwarder who misquotes any one of them absorbs the difference out of margin.
New to ocean freight quotation? Read our guide on the ocean freight quotation workflow first — it covers the full process from cargo enquiry to customer quote.
What is BAF (Bunker Adjustment Factor)?
BAF is the most significant variable surcharge in ocean freight. It compensates carriers for changes in the cost of marine fuel (bunker fuel). Bunker prices swing violently — from $300/MT in 2020 to $800/MT in 2022 — and the BAF mechanism lets carriers pass that volatility to shippers and forwarders rather than absorbing it in the base rate.
How BAF is calculated:
BAF is typically quoted per TEU or per container unit, reviewed monthly or quarterly. The calculation is:
| Component | Typical value |
|---|---|
| Average bunker consumption per TEU per voyage | 0.35–0.55 MT (varies by vessel size and lane) |
| Fuel price benchmark (VLSFO or MGO) | Published monthly — e.g., $680/MT |
| Resulting BAF per TEU | $80–$380/TEU depending on trade lane |
On the India–UAE trade (INNSA → AEJEA), BAF in H1 2026 has been running at $90–$140/TEU. On longer hauls like India–Europe, it can reach $280–$380/TEU.
Key rule: BAF applies per container, not per ton. A 40' HC and a 20' container pay different BAF amounts (the 40' unit typically pays 1.7–2× the 20' unit).
What is CAF (Currency Adjustment Factor)?
CAF compensates carriers for exchange rate risk on trades where freight is invoiced in USD but carriers incur costs in other currencies. It is most common on:
- Asia–Europe (carriers have EUR costs but bill in USD)
- Trans-Pacific (USD billing, local currency costs in origin countries)
- Intra-Asia (JPY, CNY, KRW exposure)
CAF is expressed as a percentage of the base ocean freight. Typical CAF rates:
| Trade | CAF rate |
|---|---|
| China/Asia → Europe | 3–8% |
| Asia → Americas | 2–5% |
| India → Europe | 2–6% |
| Intra-Asia | 1–4% |
On a $1,200 base rate with 5% CAF, you add $60. If you forget this line item when building a forwarder quote, the difference comes out of your gross margin.
What is THC (Terminal Handling Charge)?
THC covers port terminal operations — container receiving, storage, positioning, and loading/unloading from vessel. It is charged at both origin and destination, and the rate is set by the terminal operator, not the carrier.
THC by major port (approximate, 40' HC):
| Port | Origin THC | Destination THC |
|---|---|---|
| Nhava Sheva (INNSA) | $135–$160 | — |
| Mundra (INMUN) | $110–$140 | — |
| Jebel Ali (AEJEA) | — | $100–$135 |
| Rotterdam (NLRTM) | — | $180–$240 |
| Felixstowe (GBFXT) | — | $160–$210 |
| Singapore (SGSIN) | $95–$130 | $95–$130 |
Critical point: THC is often excluded from "all-in" rate sheets to make the headline rate look lower. Always confirm whether the rate sheet you're working from includes or excludes THC at both ends.
What is LSS (Low Sulphur Surcharge)?
LSS was introduced after the IMO 2020 regulation took effect on January 1, 2020. The regulation requires vessels to burn fuel with a maximum sulphur content of 0.5% (down from 3.5%). Low-sulphur fuel (VLSFO — Very Low Sulphur Fuel Oil) costs significantly more than traditional HFO.
LSS ranges from $40–$120/TEU depending on the trade lane and current fuel prices. On short-haul trades (India–Gulf), it is typically $45–$70/TEU. On long-haul trades (India–Europe, India–US), it can reach $90–$120/TEU.
Note: Some carriers have consolidated BAF and LSS into a single "Environmental Bunker Contribution" (EBC) or "Bunker Recovery Charge" (BRC). When quoting, verify whether your rate sheet shows them separately or bundled.
What is ISPS (International Ship and Port Facility Security)?
ISPS stands for the International Ship and Port Facility Security Code, adopted by IMO after 9/11. The ISPS levy covers the cost of implementing mandated security measures at ports and vessels.
ISPS is non-negotiable — it is a regulatory requirement, not a commercial add-on. Typical ISPS rates:
| Port type | ISPS per container |
|---|---|
| Major hub port | $14–$25 |
| Secondary port | $8–$16 |
ISPS is charged at origin, destination, or both, depending on the carrier and trade.
Other common surcharges
| Surcharge | What it covers |
|---|---|
| GRI (General Rate Increase) | A broad market rate increase announced by carriers, typically effective at start of month. Ranges from $100–$500/TEU. |
| PSS (Peak Season Surcharge) | Applied during high-demand periods (typically May–August, October–November). $100–$300/TEU. |
| EBS (Emergency Bunker Surcharge) | A temporary fuel surcharge applied when bunker prices spike sharply. Now largely replaced by BAF mechanisms. |
| WRS (War Risk Surcharge) | Applies to trades passing through high-risk zones (Red Sea, Gulf of Aden, Strait of Hormuz). $50–$200/TEU. |
| CIC (Container Imbalance Charge) | Applied when equipment is repositioned from surplus to deficit regions. $50–$300/TEU. |
| ODF (Origin Documentation Fee) | Carrier's fee for bill of lading issuance and documentation at origin. $30–$75 per shipment. |
| AMS/ENS | US/EU advance manifest filing fees. AMS is typically $25–$35 per B/L; ENS $15–$25 per B/L. |
| Chassis fee | US/Canada inland — $15–$35/day for chassis use. |
How a correctly modeled all-in quote looks
For a 40' HC container, Nhava Sheva → Jebel Ali:
| Line item | Amount (USD) |
|---|---|
| Ocean freight (OF) | $850 |
| BAF | $120 |
| LSS | $55 |
| THC origin (INNSA) | $148 |
| THC destination (AEJEA) | $118 |
| ISPS | $22 |
| ODF | $45 |
| Total all-in | $1,358 |
A quote missing BAF and LSS would show $850 — $508 short of what the forwarder needs to collect. At 12% margin, that's the difference between a profitable shipment and a loss.
How Susea handles surcharge automation
Manually applying and updating surcharges across carriers and lanes is what kills pricing desk efficiency. Susea's surcharge engine models BAF, CAF, THC, LSS, ISPS, GRI, PSS, WRS, and CIC per carrier, per trade lane, and per container type — automatically applied to every quote.
When carriers update their BAF table (typically monthly), Susea updates it once and it propagates to all future quotes. No more Excel files, no more manual line item checking.
Susea is the AI pricing OS for ocean freight forwarders. Join the waitlist to see surcharge automation in action.
Frequently asked questions
What is BAF in ocean freight?
BAF stands for Bunker Adjustment Factor. It is a variable surcharge applied by ocean carriers to offset fuel cost fluctuations. BAF is typically quoted per TEU or per container and reviewed monthly or quarterly. In 2024–2025, BAF on major trades ranged from $80 to $320 per TEU depending on the trade lane and fuel price.
What is THC in shipping?
THC stands for Terminal Handling Charge. It covers the cost of moving a container within a port terminal — loading, unloading, and positioning. THC is charged at both origin and destination ports and varies by port. At Nhava Sheva (Mumbai), THC for a 40' container is typically $120–$180. At Jebel Ali (Dubai), it is $80–$140.
What is the difference between CAF and BAF?
BAF (Bunker Adjustment Factor) is a fuel-cost surcharge, while CAF (Currency Adjustment Factor) is a surcharge designed to offset exchange rate fluctuations between the carrier's billing currency and the local currency in a trade lane. CAF is common on Asia–Europe and Asia–Americas trades. Both are applied on top of the base ocean freight rate.
What is LSS surcharge in ocean freight?
LSS stands for Low Sulphur Surcharge. Introduced after the IMO 2020 regulation required ships to burn low-sulphur fuel, LSS compensates carriers for the higher cost of compliant fuel. It is typically $40–$120 per TEU on most trades.
Is ISPS mandatory? Can I negotiate it?
ISPS is a mandatory security levy set by the International Maritime Organization. It is non-negotiable — all vessels and ports compliant with the ISPS Code collect this charge. The rate is typically $8–$25 per container depending on the port.