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  • Ocean freight

     
     

    Most coffee contracts are FOB - the receivers pay the freight. Receivers prefer this because they can negotiate rates of freight which individual exporters or producing countries may be unable to obtain. For this reason bills of lading do not always indicate the freight charge, or simply state freight as per agreement.

    As they are liable to pay the freight, receivers consider that they should also negotiate the rates (and argue, indirectly, that they are in fact better placed to do so). This may be so, but whenever the freight from a particular port increases buyers adjust their cost calculation for the origin in question as they calculate the cost of all coffee on the basis landed port or roasting plant of destination. If the freight rate from a particular country increases, the prices bid for coffee from that origin (the differential) will eventually compensate for this if freights from comparable origins have not also risen. This because the market compares like with like, that is, the landed cost. Ultimately therefore it is the producers who pay the freight charges. However, without the present arrangements some freight rates would likely be higher. (See also 05, Logistics.)

    Terminal handling charges (THC) are an important part of container transport costs and can vary considerably between shipping lines, sometimes to the point where an apparently attractive rate of freight is in fact not attractive at all. Shippers should keep themselves informed of the THC raised directly or indirectly by individual shipping lines at the ports they load from as they can face unexpected costs if buyers specify a line whose freight is low (buyers' advantage) but whose THC are high (shippers' disadvantage).

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