gulf of aden surcharge

What Is A Gulf of Aden Surcharge?

Situated in the Indian Ocean between Yemen, the Arabian Sea, and countries like Djibouti and Somalia, the Gulf of Aden is a deep-water gulf that serves as one of the most integral waterways in the world economy. 

According to the US Energy Information Administration, nearly 9-11% of the world’s seaborne petroleum passes through it to hundreds of regional refineries. Many carriers and shipowners use the 2-mile-wide channel as a gateway, which connects the Arabian and Mediterranean Sea. 

Due to the importance of its strategic location, the Gulf of Aden is among the most popular operating ocean routes, albeit with piracy risks. As a result, carriers that pass through this route would charge an additional fee called a Gulf of Aden Surcharge.

The Gulf of Aden Surcharge is a fee charged by carriers to shippers or consignees for cargo that passes through the Gulf of Aden. It’s an accessorial fee of about $20 to $40 that is charged separately to offset increased operating costs and additional expenses of passing through the gulf, similar to a Piracy Risk Surcharge (PRS).

Carriers who operate vessels that pass through the Gulf of Aden have to pay for increased insurance premiums and additional vessel security when passing through piracy-prone waters. According to a published article, pirate attacks, robberies, kidnapping, and similar incidents at sea cost the global economy nearly $12 billion annually on average. 

The Gulf of Aden has long been a hotspot for piracy and has a troubled history of hijacking and crude oil theft, especially near the coast of Somalia. Moreover, the region enjoys higher-than-average maritime traffic, with thousands of small vessels operating near coastal areas, which allows piratical vessels to blend in. 

According to Statista, there have been over 360 successful or attempted piracy attacks between 2010 and 2021 from the Somalian coast alone. Therefore, it’s no surprise that carriers operating in the region are required to pay a premium price for insurance to cover shipment and vessel damages in the event of a piracy incident. 

How Much Is the Gulf of Aden Surcharge?

The Gulf of Aden Surcharge is not standardized, meaning that carriers compute their costs independently and impose a fee at their own discretion – similar to the Suez Canal or Panama Canal Surcharges.

This also means that the Gulf of Aden Surcharges vary from carrier to carrier and can sometimes be negotiated. However, many factors can influence the surcharge for this shipping route, including the type of cargo being shipped, the container type, the risks involved, and the shipping volume – typically measured in twenty-foot equivalent units (TEUs). 

Although they vary between carriers, the Gulf of Aden surcharges typically range between $20 and $40 per TEU. 

Who Charges It?

The Gulf of Aden surcharge is imposed by carriers as an additional fee to offset some or all of the increased operating, security, and insurance costs. The surcharge is levied to recover any extra costs, such as vessel repairs following an attack or the additional fuel used to re-route ships to escape pirates. 

Who Pays for It?

Shippers or consignees are required to pay the surcharge since they’re the party bearing the ocean freight costs, according to the freight terms. This surcharge appears as an accessorial charge and is visible as s separate line item within the carrier’s invoice to the party with whom they are in contract.