Understanding the Different Types of Ocean Freight Rates
Category: Logistics Author: Baudouin de Dreuille Date: 6/17/2024 Reading time: 2 min
Here is an overview of the main types of rates used in ocean freight.
1. Freight All Kinds — FAK
FAK, or “Freight All Kinds,” is a standard rate offered by shipping lines to freight forwarders and, ultimately, to shippers. These rates come with no equipment or loading guarantees, meaning that access to containers and loading of cargo depends on market conditions.
While this does not necessarily mean that containers will not be loaded, there is uncertainty related to equipment availability and loading capacity. FAK rates are generally valid for a period of two weeks to one month.
2. Premium Spot Rates
Premium rates are spot rates that guarantee priority access to equipment. Unlike FAK rates, these premium rates offer additional assurance regarding container availability and cargo loading. Offered at higher prices than FAK rates, they allow shippers to secure container loading on a spot basis.
3. Nominated Account Contract — NAC
A NAC is a contract in which the customer is recognized by the shipping line as a privileged client through the freight forwarder. This status guarantees access to equipment and capacity. NAC contracts are generally longer-term, ranging from six months to a year or more.
There are two types of NAC:
- Strict NAC: The customer is directly identified by the shipping line and has dedicated capacity reserved on vessels in their name.
- Basket NAC: The freight forwarder has capacity reserved for a restricted panel of clients.
Freight forwarders typically offer these allocations only to their regular clients. Access to these contracts usually requires the shipper to commit to a minimum volume.
Some contracts include “dead freight” clauses, meaning penalties apply if the shipper fails to provide the minimum volume.
4. Beneficial Cargo Owner — BCO
BCO, or “Beneficial Cargo Owner,” is reserved for the largest shippers who contract directly with shipping lines. This type of contract offers the best possible equipment and loading guarantees. BCOs benefit from long-term contracts, often annual or multi-year, providing great stability.
Companies such as Maisons du Monde and IKEA use this type of contract to secure their supply chains.
Conclusion
The choice between FAK, premium rates, allocations/NAC, and BCO depends on the frequency and volume of the shipper’s shipments as well as their strategic decisions.
Freight forwarders play a crucial role by negotiating and offering these various options to their clients, thereby meeting the diverse requirements of shippers.