panama canal surcharge

What Is A Panama Canal Surcharge (PCS)?

The Panama Canal is one of the world’s most important waterways. It was completed in 1904 and has become a major conduit for maritime trade. The artificial waterway divides North America and South America and cuts through the Isthmus of Panama to connect the Atlantic Ocean with the Pacific Ocean via the Caribbean Sea. 

The 48-mile canal is regarded as the most crucial piece of infrastructure in the western hemisphere, accounting for nearly 5% of global trade. It also enables carriers to avoid using the lengthy and more dangerous Atlantic-Pacific routes, such as the Cape Horn route in South Africa. 

The Panama Canal Surcharge (PCS) is a fee levied by shipping lines to freight owners for transporting cargo through the Panama Canal. This fee is intended to cover the operational costs incurred from charges by the Panama Canal Authority while using this shipping route.

However, as one of the biggest facilitators of international cargo shipping and maritime trade, it’s no surprise that the Panama Canal is among the potential routes vulnerable to threats of maritime piracy.

According to IMB PRC’s five-year statistics, there have been 30 piracy and robbery incidents near the Panama Canal in Caribbean waters in 2020 alone. Moreover, there’s a significant degree of under-reporting of maritime piracy incidents in the region. 

How Much Is the Panama Canal Surcharge?

Similar to the Gulf of Aden and Suez Canal Surcharges, Panama Canal Surcharges vary between carriers, as there is no standardization of fees. There are two components that shipping lines use to compute the levy.

Firstly, vessels traveling through the Panama Canal, are required to pay toll fees to the relevant authority, based on the vessel’s length overall (LOA). Secondly, as this region is prone to piracy, carriers are required to pay increased insurance premiums.

Considering these factors, carriers typically charge a Panama Canal Surcharge of about $15 to $35 per TEU (twenty-foot equivalent unit).  

Who Charges It?

The Panama Canal Authority charges carriers a toll fee based on vessel size, cargo type, and total volume. Combined with the increased insurance premiums, carriers charge the Panama Canal Surcharge to offset these additional costs.

Who Pays for It?

Freight owners (typically the shipper or consignee is typically required to bear the Panama Canal Surcharge since it’s a fee incurred on their cargo. In the carrier’s invoice, these surcharges are classified as accessorial fees and are listed as a separate line item (separate from ocean freight charges and other fees).