Wharfage is a term that might sound unfamiliar to many, but if you’re involved in shipping or importing/exporting goods, it’s an important concept to understand. This blog will explain everything you need to know about wharfage in a very simple way.
What is Wharfage?
Wharfage is a fee that port authorities charge for the use of a wharf. A wharf is a structure on the shore of a harbor where ships dock to load or unload cargo. When a ship uses this wharf, there is a cost associated with it, and this cost is known as wharfage.
In simple terms, wharfage is the price you pay to use the wharf for loading and unloading goods. It’s an essential part of port charges and is usually included in the overall shipping costs.
How is Wharfage Calculated?
Wharfage charges are typically calculated based on the amount of cargo that is being loaded or unloaded. This is measured in terms of “revenue tons,” which could be based on either the weight (in metric tons) or the volume (in cubic meters) of the cargo. The charge is set according to whichever measure is greater.
For example, if you are shipping large but lightweight goods, the volume might be used to calculate the wharfage. On the other hand, if you are shipping something very heavy but small in size, the weight will be considered.
Sometimes, wharfage can also be calculated per container, depending on the port’s rules. The charges may vary based on the type of cargo, such as bulk goods, liquids, or containers.
Who Pays Wharfage Charges?
The responsibility for paying wharfage charges can fall on either the exporter or the importer, depending on the agreed payment terms. These terms are often set out in international contracts called Incoterms (International Commercial Terms).
For example, if the shipping contract is based on the term “FOB” (Free on Board), the exporter pays the wharfage at the port of origin. But if the contract is based on “CIF” (Cost, Insurance, and Freight), the importer might be responsible for the wharfage at the destination port.
It’s important to know who is responsible for these charges before shipping, as they can add up and affect the overall cost of transportation.
Difference Between Wharfage and Other Charges
Wharfage is just one of many charges associated with shipping. Here’s how it compares to some other common fees:
- Wharfage vs. Demurrage: While wharfage is a fee for using the wharf to load or unload goods, demurrage is a penalty charged when a ship or container stays at the port longer than the agreed time. Demurrage is more about the time a vessel stays at the dock, while wharfage is about the space it uses.
- Wharfage vs. Port Charges: Port charges include a variety of fees that are collected for using different facilities at the port. These might include charges for anchoring, sanitation, and customs duties. Wharfage is specifically the fee for using the wharf, which is just one part of the overall port charges.
- Wharfage vs. Arrastre: Arrastre charges are fees for handling the cargo within the port, including moving it to and from the wharf. While wharfage covers the cost of using the wharf itself, arrastre is related to the labor and management needed to handle the cargo.
- Wharfage vs. Dockage: Dockage is the fee for using the dock, the water space where the ship is moored. In many cases, wharfage charges include dockage fees, as they are both related to the use of port facilities.
Why Wharfage is Important
Wharfage is a significant cost in the shipping process and can impact the overall cost of transporting goods. Understanding this charge is important for both exporters and importers as it helps in better financial planning.
Ports usually set wharfage fees for the year, and any ship that passes through must pay these charges. Because these fees can vary from port to port, knowing the wharfage rates at different ports can help businesses choose the most cost-effective shipping routes.
Where is Wharfage Charged?
Wharfage is charged at any port where a ship docks to load or unload goods. This can happen at wharfs, quays, or berths:
- Wharfs: These are raised platforms near the water where ships are moored for loading and unloading. Wharfage is named after these structures.
- Quays: A quay is a solid structure built near the water’s edge where cargo can be handled. Wharfage is charged here as well because the goods are still being moved through a port facility.
- Berths: A berth is a specific location in a port where a ship can dock. Even though it might not be a wharf, wharfage charges still apply when cargo is loaded or unloaded.
How to Manage Wharfage Costs
Managing wharfage costs is essential for keeping shipping expenses under control. Here are a few tips:
- Know the Incoterms: Understand the payment terms of your shipping contract to know who is responsible for wharfage. This will help avoid unexpected charges.
- Plan the Shipping Route: Choose ports with lower wharfage fees if possible. Some ports may offer more competitive rates.
- Consolidate Shipments: If you can, consolidate shipments to reduce the number of times you need to pay wharfage fees. Fewer shipments can mean lower overall costs.
- Negotiate with Carriers: Sometimes, shipping companies can offer discounts or include wharfage in their base freight rate. It’s worth negotiating these terms to get the best deal.
Conclusion
Wharfage might seem like a small part of the shipping process, but it plays a big role in determining the overall cost of transporting goods. By understanding what wharfage is, how it’s calculated, and who pays for it, businesses can make better decisions and manage their shipping expenses more effectively.
Whether you’re an exporter or an importer, knowing about wharfage will help you navigate the complexities of international trade more easily. Keep these points in mind the next time you’re involved in shipping, and you’ll be well-prepared to handle wharfage charges without any surprises.
