Whenever possible, ocean carriers try to maximize container utilization on vessels. However, this may not always be possible due to low water levels at certain ports. In these scenarios carriers may only load a certain amount of containers, in order to reduce the risk of vessel grounding due to the increased weight.
A Low Water Surcharge (LWS) is a fee that is charged by carriers, in order to offset limited container utilization due to low water levels in certain ports or rivers.
In this article, we will be taking a closer look at how much the Low Water Surcharge is, who charges it, who pays for it and which ports and rivers are most commonly affected.
How Much Is the Low Water Surcharge?
Carriers consider many factors when fixing the low water surcharge. Variables that are considered include total container utilization of the ship, maximum possible utilization, port of loading, port of discharge, amongst various others.
This surcharge is often quoted per twenty-foot equivalent unit (TEU) or per container, ranging from about $50 – $300, depending on the actual water levels. Here’s an example of Maersk’s Low Water Surcharge announcement for all containers discharging in Montreal, Canada.
How Is the Low Water Surcharge Calculated and When Does It Apply?
Carriers charge Low Water Surcharges depending on the water level of a given port or river. Shipping lines will continuously monitor official water levels, which are typically declared by the local regulatory agencies.
According to the actual and projected water levels and the vessel’s draft, they then have to determine how many containers it can hold. A reduced capacity will affect a vessel’s total container utilization, which in turn means that carriers will realize less revenue.
They will then calculate the difference of the maximum utilization with the projected utilization and divide this value on a container or TEU level.
Who Charges the Low Water Surcharge?
Vessel operators, also referred to as carriers or shipping lines, charge the Low Water Surcharge. They are also responsible for collecting the data, calculating the surcharges and imposing them.
These surcharges are usually announced through a memo and typically cannot be waived, unless there is a prior agreement between a shipping line and a cargo owner.
Who Pays for the Low Water Surcharge?
Low Water Surcharges are usually paid by the party who is paying for the ocean freight, which is mostly the cargo owner (shipper or consignee). This depends on the Incoterm that both shipper and consignee have agreed upon.
What Ports/Areas Are Affected By Low Water?
Most international sea ports are deep water ports and can accommodate fully laden container vessels. However, not all port locations or rivers through which vessels pass through may facilitate this.
Here’s a list of the most common ports and rivers that suffer from occasional low water levels. Carriers departing or arriving at these ports often impose a low water surcharge during specific times of the year.
- St. Lawrence River – A major entry point to support the economy and supply chain of Canada. The maximum vessel draft is about 8 – 9 meters. Here, water levels are at their highest during spring.
- Port Manus, Brazil – Located in the north of Brazil with a maximum draft of about 11.5 meters. The port handles about 350,000 TEU per year. Depending on the water levels, ship discharge operations are expected to face delays.
- Rhine River – A vital waterway to big European deep sea ports serving the ports of Antwerp, Rotterdam, Germany, and also France. Water levels begin to drop in summer. In addition to low water surcharges, container loading confirmation may not be guaranteed.
It’s important to note that carriers may not impose low water surcharges all year round. This surcharge is only designed to offset a potential revenue loss of operating a container vessel with a reduced utilization, due to low water levels.
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About the Author
Gerrit is a certified international supply chain management professional with 16 years of industry experience, having worked for one of the largest global freight forwarders.
As the co-founder of freightcourse, he’s committed to his passion for serving as a source of education and information on various supply chain topics.