Global trade is facilitated by the transport and transfer of goods between merchants on an international scale. Sellers and buyers worldwide transfer large volumes of goods that are transported mostly by large ocean cargo vessels.
The demand for swifter and safer methods of transporting cargo has only grown in recent times, though it goes through the occasional phases of boom and recession.
The largest of ocean cargo vessels measures close to half a kilometre in length and can carry more than 23,000 TEUs onboard (twenty-foot equivalent units or 20’ containers).
The term Cubic Meter or CBM is commonly used in ports, warehouses, and in the sea – air – land freight.
A cubic meter, abbreviated to CBM, is a measurement of volume that is generally used for calculating storage space, storage charges, and freight charges.
It is the volume of an object that is one meter wide by one meter long by one meter high (1 m X 1 m X 1 m).
To understand this concept better, let us take the example of a loaded pallet of cornflour weighing 950 KG.
Width = 1.2 m
Length = 1.0 m
Height = 1.5 m
The CBM of this loaded pallet will therefore be 1.2 m X 1.0 m X 1.5 m = 1.8 CBM.
Sea freight especially for Less-than Container Load (LCL) shipments is quoted per CBM as well as per Freight-Ton.
LCL cargo also referred to as Groupage cargo does not fill a container and hence it is usually consolidated with other similar cargo, to fill a container going to the same destination.
If the weight of the consignment exceeds 1 ton (1000 KG), then the weight is used to calculate freight charges.
For LCL cargo, the CBM rate is considered only when the weight is below this limit.
Why is this so?
Taking the above example, a consignment of 950 KG of cornflour will have a specific space requirement.
A consignment of pop-corn of the same weight (950 KG) will have a different space requirement. Here the cornflour will take less space than the consignment of pop-corn.
At the same time, the more the weight of a consignment, the lesser the weight of other consignments that can be included in the container.
Hence, to make up for the lost space if the carrier were to charge by weight for the shipment of pop-corn, it would take the CBM or volumetric weight.
Similarly, to make up for the excess weight of heavy cargo, the carrier would charge more.
Another scenario is when there is fragile cargo or cargo that cannot be stacked more than a single layer high.
The space over what has been stacked on the container floor is wasted.
The cost of storage space lost here will be considered when quoting the freight rate to the customer.
For LCL shipments, freight companies calculate the freight charge using both CBM (w X l X h) as well as by using the volumetric weight (weight converted to volume).
Volumetric weight or weight-based volume is derived by dividing the weight of cargo in kilograms by 1000.
The higher of the two freight charges (CBM V weight converted to CBM) would then be charged to the customer.
The final volume that is taken is known as the Chargeable Volume.
Taking the weight and dimensions of the previous example, and the freight rate as US$ 43.00, we can calculate as follows:
Width 1.2 m X Length 1.0 m X Height 1.5 m = 1.8 CBM
Volumetric Weight = 950 kilograms/1000 = 0.95 CBM
Freight rate = US$ 43.00
Freight charges when calculated using CBM will be US$77.40 (1.8 CBM X US$ 43.00 = US$ 77.40).
Freight charges when calculated using volumetric weight of 0.95 CBM will be US$ 40.85 (0.95 CBM X US$ 43.00 = US$ 40.85)
The higher of the two is the freight charge of US$ 77.40 that is arrived at by using 1.8 CBM and therefore, this is the freight that will be charged to the customer.
In this case, the chargeable volume will be 1.8 CBM.
It is to be mentioned here that in the calculation of ocean freight for LCL cargo, 1 CBM is taken as equal to 1,000 KG (1 metric ton).
This would mean that 1 CBM will be considered as 1 ton in weight. Freight charges will be based on this assumption.
If the volumetric weight is more than 1 CBM then that will be taken to calculate the freight charges for the consignment.
Methods of Calculating CBM
Cargo may not always come packed in regular shapes such as a cube or a rectangular box, with its side in straight lines and at right angles. They can be of abnormal shapes and sizes depending on the type of cargo. It can come packed in cylindrical or irregular shapes. There are different ways to calculate the CBM for such loads.
A cube is a perfect box with 6 squares of the same size, standing at right angles to each other, as its sides. A cuboid is very similar to this however, its 6 faces or sides are all rectangular.
The method to calculate the CBM of a cube or a cuboid cargo is the same.
Measuring CBM of a Cube or Cuboid
Measure the length, width, and height of the cargo in meters (for a cube, this will all be equal). If this measurement is in any other standard, convert it into meters. Multiply the width with the length and the height (w x l X h) and you have the CBM of the cargo.
Measurement of CBM of a Cylindrical Package
Stand the cargo upright on one of its circular faces and measure its height. Then, measure the radius of the container. Measurements should be in meters.
With the above measurements, use this calculation to get the CBM:
CBM = π X height X radius2 (this may be simplified and shown as πr2h). The value of π is generally taken as 3.14 by convention.
Measurement of CBM of an Abnormally-Shaped Package
The most common method adopted to calculate CBM of an abnormally-shaped package is by measuring its longest width, longest length, and longest height and multiplying all these together (w max X l max X h max).
Especially for cargo with abnormal dimensions, it is the convention to compare the freight charges calculated using CBM with the charges calculated using the volumetric weight of the cargo. Whichever is higher of the two will be charged to the customer.
• Cargo measurement that is shown in feet can be converted to meter by multiplying the numbers with 0.305.
• Inches may be converted to meter by multiplying the number with a factor of 0.025.
• Measurement in centimetres may be converted to meters by multiplying the number with a factor of 0.01.
The charge quoted for a Full Container Load (FCL) is usually a Per Container rate.
CBM Rates and Factors Influencing It
We have looked at various methods of calculating CBM. How do ocean carriers and other agencies arrive at the CBM rate that is charged to customers?
Several factors are considered when computing the CBM rate.
Some of these are the port charges, other handling charges, the type of cargo, the basic freight from origin to destination, Bunker Adjustment Factor (BAF), and Currency Adjustment Factor (CAF).
Port and Other Handling Charges
The port charges and handling charges may vary between different ports. This is the charge that is payable to port authorities for using the various services, facilities, and equipment that are offered by them for the loading and offloading of cargo.
Type of Cargo
Cargo can be generally classified as dry or frozen. Frozen cargo requires a refrigerated container to transport it. Therefore, the consolidation of frozen cargo costs substantially more than the shipment of LCL in a general dry container.
Bunker Adjustment Factor or BAF
Commonly referred to as BAF, the Bunker Adjustment Factor is an additional levy on the customer to compensate the ocean carrier for fluctuations in the cost of fuel. In some markets, it is also known as the Bunker Surcharge.
Currency Adjustment Factor or CAF
Similarly, the Currency Adjustment Factor or CAF is a surcharge that is passed on to the customer to make up for fluctuations in the currency rates between different markets. It is a kind of risk mitigation for the ocean carrier from adverse currency fluctuations.
Depending on the volumes moved and the regularity of business, the customer may sometimes get preferential CBM rates from the ocean carrier or their agent.
While FCL shipments are considered easy to handle, LCL shipments involve more processes. Therefore, the costing of the CBM rate will also include the costs associated with these extra processes.
Processes of Shipping LCL Cargo
LCLs are usually in pallet loads or boxes and require to be picked up from the customer’s premises. These are then taken to the carrier’s warehouse or yard, repacked or palletized if they are in loose boxes, grouped and labelled with other cargo meant for the same destination or route.
Such grouped cargo is then stuffed into the container, documentation completed, all dues settled, and loaded onboard the vessel.
The same processes, but in reverse, is carried out once the container is offloaded at the port of discharge. After payment of all port and customs dues it is taken to the carrier’s warehouse or yard and de-stuffed, segregated and kept ready for pick-up or delivery to the customer’s warehouse.
These steps involve more manpower and usage of equipment that involves different costs. Unlike a straightforward method, costing of LCL freight rates is therefore complex.
Sea freight Consolidators
Sea freight consolidators specialize in LCL shipments. They take a full container from the ocean carrier and consolidate the LCL cargo from different customers in it. They may also handle the inland haulage, repacking and labelling, documentation and other requirements of the customer. The container goes as an FCL from the consolidator who charges the customer a pro-rata rate per CBM or by weight for their smaller consignments.
Pallet Size and CBM
While sending goods, one must know the pallet size that is to be used as this helps with the planning of the cargo and calculation of CBM. Different-sized pallets may also have different handling requirements.
While there are no fixed measurements for stacked pallets, some important factors that should be taken into consideration are the stability of the stacked pallet, packed weight of the pallet, nature and individual packing of cargo that is stacked, and height of the container.
A pallet should not be stacked too high that it becomes unstable and might topple over. The loading and unloading of pallets from/to containers may be done using pallet jacks or forklift trucks and therefore the pallet’s dimensions and weight will have to suit these types of equipment. Fragile goods and those that are damaged easily have to be packed and stacked accordingly. In such cases, pallets should also not be kept in a two-tier arrangement inside the container.
Generally, stacked pallet heights do not exceed 84 inches (this includes the height of the pallet and the pallet cap).
The most commonly used pallets; the Standard wooden pallets and the Euro pallets have very negligible size differences between them. Their sizes are 48” X 40” and 47.24” X 39.37” respectively.
To regularize the different pallet types and sizes that are used in different countries, the International Standards Organization (ISO) has set acceptable standards of dimensions and quality levels for wooden pallets through the ISO standard 18333:2014.
A TEU (20’ dry container) with a maximum capacity of 33.0 CBM can hold a layer of ten normal loaded pallets while a 40’ dry container with a maximum capacity of 67.0 CBM capacity holds about 20 normal loaded pallets in a single layer. Depending on the pallet size and nature of cargo, it can be increased to two layers in both these containers (20 pallets and 40 pallets respectively).
A point to note here is that containers also have weight restrictions. A dry TEU can take a maximum payload of 28,200 KG and a 40’ dry container will hold a maximum weight of 28,800 KG. The total weight of the cargo and the container should not exceed 30,480 KG for a 20’ container and 32,500 KG for a 40’ container.
You Might Also Like To Read:
- Nautical Law: What is UNCLOS?
- Container Seals: Importance, Types, And Requirements
- What is Seaway Bill in Shipping?
- Bill Of Lading in Shipping: Importance, Purpose, And Types
- Rotterdam Rules – Redefining and Introducing the Electronic Bill of Lading
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