Why Shipping Tariff Is Paid Locally By Consignees At Destination

WHY SHIPPING TARIFF IS PAID LOCALLY AND BILLED SEPARATELY PER TRADE BY SHIPPING COMPANIES AT FINAL DESTINATION

Why Shipping Tariff

In the field of trade, firms rendering diverse operational services traditionally have in place legitimate avenues by which revenues are generated known as tariffs. However, a good number of us still wallow in ignorance, such that most of us don’t know why shipping tariffs are paid to shipping companies at the destination having paid the shipper!

This payment has left consignees notably citizen returnees with mind-bothering questions like – why pay the second time while taking delivery of the shipment through their agents at the final destination?   

Though such a question appears to be direct, why the answer is rhetorically embedded in the question? Well, these consignees are meant to pay or had paid the shipper of the subject product but honestly, they had only paid the Freight rate. Freight is paid per trade to the shipper based on the terms of trade, either based on Freight Prepaid, Freight Collect, and so on, which is dependent on several factors such as value, volume, and distance. Ironically, it should be fair to note that freight has nothing to do with this payable local tariff that is paid to the shipping company at the destination.

Going forward, as we double down on the subject topic, it should be borne in mind that the Freight rate that is paid to the shipper of goods consists of Basic Freight and other bills namely, Freight Additional and Surcharges. Although, there are factors used for determining ocean freight rates but won’t be detailed in our current analysis. However, freight is the cost of handling and transportation of commodities from the port of origin to the final destination.

Meanwhile, drifting from freight to focus primarily on the topic of discussion, is believe we’re beginning to see the light out of the tunnel since the tariff which is payable to a shipping company at the destination in local currency comprises operational costs, which are derived from several factors, basically handling, logistics and storage.     

To ensure our submission on this subject is delivered according to specifics, it will be fair to put things nicely down based on how the subject tariff is applied in practice as we focus on the factors that make up the ‘shipping tariff’.

CONSTITUENTS OF THE SUBJECT TARIFF

In practice, before a shipment arrives at its final destination, the shipper’s agent at the destination or the shipping company is expected to, first carry out the shipment’s ‘documentation process’ per trade. The shipment documentation should be thoroughly established within and across the country’s customs platform as declared by the shipper of goods and the consignee based on foreign trade.

Simply put, documentation per trade meant the shipping company’s internal trade processes needed to be carried out before customs manifestation, these include the creation of the shipment’s breakdown manifest after careful study of the shipment documents, which is dependent on the shipment and consignee’s information and is, in turn, deployed across the company’s internal process such as billing. In the same vein, the information used for the creation of the breakdown manifest is also required to be transmitted to the customs portal as declared, thereby, taking things to the next phase.

This phase of action meant the creation and transmission of trade E-manifest, thus, the generation of the vessel’s ‘rotation number’ (RTN) (this is a topic of separate discussion), per voyage for seaborne trade. Once generated (RTN), the subject variables automatically offer consignees the needed access to the customs command portal for the onward processing and exit of trade through the process of clearing. However, these task carried out by the shipping company as highlighted brings about ‘documentation charges’.

Aside from the above function, the operational cost of equipment or plant hire is also one of the operational bills that are often factored in by shipping companies at the final destination, noting these as part of the logistics operational cost incurred. This includes costs incurred during unloading and handling down to the storage of the subject shipment, which going by the traditional approach is often billed for a specific period it’s to be rated.

At this juncture, it is believed we now understand why shipping tariff is billed separately and locally by shipping companies at the final destination. However, trust you found this helpful.  

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