Emergency Bunker Surcharge The Ultimate FAQ Guide

Emergency Bunker Surcharge: The Ultimate FAQ Guide

If you have any question about emergency bunker surcharge, you will find the answer right here.

So keep reading to learn more.

What Is Emergency Bunker Surcharge?

We can define Emergency Bunker Surcharge as the sudden increase in prices resulting from increased fuel costs.

This rapid fluctuation of fuel prices allows the carriers to provide mitigations to allow ships to continue operating.

To determine the constant fluctuations of fuel prices, the EBS works with the Bunker Adjustment Factor. Therefore, it implies a sudden increase in bunker prices will increase BAF and vice versa.

What Is Bunkering?

Bunkering

Bunkering

It is a process that involves supplying fuel oil to the ship bunkers during the shipping process. Modern bunkering involves using fuels such as petroleum products, unlike when coal steam up the ship.

Bunkering sometimes can be dangerous, and there, you should be extra careful while conducting this process.

Here are procedures to follow before bickering:

  1. The engineer checks out which bunker tanks require filling after confirming the available quantity of fuel from the shore office.
  2. In most cases, emptying of tanks or shifting of oil from one bunker to another is important. It prevents the mixing of these fuel oils, which might result in the incompatibility of the oils.
  3. Offer relevant information to individuals undertaking the bunkering process.

When Do Carriers Charge An Emergency Bunker Surcharge?

Different types of carriers

Different types of carriers

Carriers always try to look for ways to mitigate the constant fluctuation of fuel prices.

However, the constant changes in prices might increase the price where the carrier is unaware and incurs losses.

Carriers Charge EBS when the fuel price increases and there is a shorter timeline regarding FMC regulations.

The Emergency Bunker Surcharge does not immediately reflect on the increase and decrease of fuel prices hence more benefits.

Carriers also charge Emergency Bunker Surcharge when there is conflict from the shipper. Normally, the shippers claim the carriers should be responsible for the increase in fuel prices.

Therefore, the introduction of EBS protects the carriers from these mishaps.

Is Fuel Surcharge The Same As Emergency Bunker Surcharge?

No.

The Fuel Surcharge is not the same as EBS.

The additional charges that the carriers pay apart from the shipping charges, we term these additional charges as Fuel Surcharge.

With a Fuel Surcharge, you can involve a third party who signs an agreement with the shipper. Both parties determine how much standard rates you will pay and what fuel prices affect the surcharge.

Emergency Bunker Surcharge covers the carrier’s costs due to the sudden increase in fuel cost against the original anticipation.

Why Are Carriers Increasingly Charging Emergency Bunker Surcharge?

Carriers are increasingly charging Emergency Bunker Surcharges for several reasons. The main reasons are:

High Fuel Prices: Constant increases in fuel prices affect different sectors all over the world.

As a result, it causes an increase in the cost of every other commodity due to production costs.

This factor leads to constant conflicts such as strikes and demonstrations in various sectors experiencing these hikes.

Emergency Bunker Surcharge Now Low Sulfur Emissions Standards: The IMO regulatory body regulates sulfur in fuel. The sulfur content should be 0.5% from the previous 3.5%.

Low sulfur content in fuels have the following benefits:

First, Reduce Air Pollution: hence more clean air is available. Protect human health.

It’s, as a result, prevents exposing people to health hazards such as cancer, lung disease, and respiratory problems.

It also prevents environmental hazards.

However, emitting sulfur-based fuel to the environment has great side effects such as low production of produce on farms.

Sulfur cap regulations require the shippers to use fuels with low sulfur content, especially in areas with high populations.

The Decline In Spot Rates And Financial Losses: is a result of the following factors;

  • Increase in fuel and vessel charter costs
  • Weak freights rates
  • Pressure for the delivery of new containership

All these factors will lead to variations in the carrier margins.

What Is The Difference Between Emergency Bunker Surcharge (EBS) And Bunker Adjustment Factor (BAF)?

Emergency bunker surcharge occurs as a result of a constant increase in fuel prices.

Normally, the carriers are not aware of the increase in price and the sudden introduction of EBS.

Emergency bunker surcharges mostly vary with the following factors

  • Type of container you are moving
  • Fuel prices
  • Finally, the trade lane that the shipment is moving in.

The emergency bunker surcharge occurs mostly during the last minutes, which might result in inconvenience.

On the other hand, normally bunker adjustment factor caters to any extra charges as a result of constant fluctuations of bunker prices.

The base freight charges are separate from the BAF, and you can adjust quarterly.

With BAF increase in fuel prices corresponds to an increase in Bunker Adjustment Factor and vice versa.

Additionally, it allows each carrier to set their cost rates with BAF, unlike doing it collectively.

Constant updates on the Bunker Adjustment Factor Surcharge allow the shippers to always ahead.

What Is The Relationship Between Vessel Fuel And Crude Oil In Shipping?

Ideally, vessel fuel corresponds to the oil price that is set by Brent crude oil price.

This Brent crude oil is constantly increasing with a reduction in oil supply by the organization of petroleum exporting countries.

Sanctioning of fuels by some countries also contributes to an increase in fuel prices.

Why Are Vessel Fuel Prices Increasing?

Normally, you can tie fuel price to oil price. Brent crude oil usually sets the price and is constantly increasing due to a decrease in supply by OPEC.

It’s as a result, leads to low anticipation by the carriers. Hence, the carriers adopt the Emergency Bunker Surcharge to protect them.

Note, implementing the EBS allows the carrier to recover all the fuel costs they incur.

Is Emergency Bunker Surcharge An Emergency As Put?

EBS

EBS

No.

An Emergency Bunker Surcharge is not an emergency since we experience constant fuel fluctuations.

But, unfortunately, it has been happening even in the past.

Therefore, a one-time increase or decrease in fuel prices does not warrant it to be an emergency.

Also, presenting weak evidence to prove the sudden rise or decrease of fuel prices discredits the EBS as an emergency.

How Long Will An EBS Be Effect?

Normally, the carrier decides on the duration which the Emergency Bunker Surcharge will be in effect in a specific trade lane.

The possibility of continuous increase in oil prices will lead to oil cuts and the sanctioning against Iran by the u.s government.

This variation depends on the trade lane and the carrier.

Why Do Freight Costs Vary Per Trade Line?

Freight costs vary per tradeline due to the following reasons:

First, Supply And Demand: Low rates result in high traffic trade lanes where the carriers need to be competitive to attract a large market share.

In the case where freight rates are high, the demand lowers. It implies only a few carriers can provide these services.

General Rate Increase: This occurs when the freight rates are low due to competition between carriers. Thus, the need to implement the GRI to increase the freight rates.

Market Conditions: When trade lanes are in high demand, the carriers apply the pick season surcharge.

Other factors such as weather, strikes will also affect the market condition.

Which Factors Determine The Price Of Emergency Bunker Surcharge?

The following factors determine the variation in the price of EBS:

  • Size and type of container
  • Fuel prices
  • Tradeline
  • Carrier

How Much Do Emergency Bunker Surcharges Cost?

MAERSK Line

MAERSK LINE

The cost of Emergency Bunker Surcharge varies with the following factors

  • The cargo you want to ship
  • The type of containers you want
  • Whether you are shipping a dry cargo or a reefer, the reefer is not long-lasting and requires special containers.
  • Additionally, the cost varies with the carrier.

With these factors, the following are the estimates of Emergency Bunker Surcharge costs;

$50-$60 for dry containers

$90-$180 for reefer containers

How Do Carriers Bill For An Emergency Bunker Surcharge?

The carriers include the EBS to the charges of the shipment to allow balancing of the changing costs. The carrier bills the EBS as a percentage of the miles you cover.

Carriers also bill the Emergency Bunker Surcharge by comparing fuel prices from the previous week. It allows them to determine the gap between fuel prices and how to mitigate it.

Additionally, the carrier determines the retail prices from the stations then determines the average cost. It allows the carrier to determine how much Emergency Bunkering Surcharge to impose.

Is Emergency Bunker Surcharge Applicable To Both FCL And LCL Shipments?

Yes.

You can apply both the full container load and less container load to EBS. The carrier initiates this process, which applies in all trades around the ocean.

With the FCL coming into effect, the EBS will affect shipments not relating to the US and shipments on distant destinations.

For LCL, it allows implementation of Emergency Bunker Surcharge. It is, as a result, allows the carrier to recover the fuel margins.

Do Carriers Charge The Same EBS For All Kinds Of Container Shipping?

No.

Charges vary with the type of container you are shipping. These containers can be dry or reefer containers.

The cost will also vary with the length of these containers. For instance;

For reefer containers, the price ranges from $85-$250 for a 20-inch container and $180-$250 for a 40-inch container.

The price ranges from$50-60 for a 20-inch container and $90-180 for a 40-inch container in dry containers.

Who Should Pay Emergency Bunker Surcharge?

The seller pays for the Emergency Bunker Surcharge. This payment usually occurs at the port after the arrival of the cargo.

Payment of EBS varies with different trade lines. For instance

The MCM estimates the variation of the fleet and the supply of fuel to be above 2 million dollars as they approach2020.

Maersk line expects an increase in fuel supply costs to above 2 billion dollars due to the visible difference between the current fuel and the compliance.

Other trade lines such as MSC, OOCL, APL, and CGM also accept these compliances and subject these costs to customers.

How Do Carriers Communicate Emergency Bunker Surcharges?

The introduction of EBS allows continuous and sustainable services to the customers. Carriers may communicate through the following ways:

They reach out to local MCC transport representatives to inquire about customer needs’ concerns, questions, or clarifications.

They allow you to log into the pages they provide to view information about the EBS. In addition, if you do not have an account, they allow you to register for the same.

You can contact the carrier via calling the toll number they give (440-336-8862)

Also, you can visit and connect with the carrier via the website.

What Is The Difference Between Low Sulphur Surcharge And Emergency Bunker Surcharge?

A low sulfur surcharge is normally the charge the seller pays while using low sulfur fuels. These costs will cover these costs as the sulfur cap regulation standards.

While EBS covers the sudden increase or decrease of fuel prices, this fluctuation leads to losses; hence implementing the EBS allows compensation to the carrier.

What Are The Implications Of EBS In The Freight Forwarding Industry?

Emergency bunker surcharge implications on the freight forwarding industry include:

  • Weak freight rates
  • Fluctuating fuel prices
  • The conflict between the shippers and the ocean carriers,
  • Last minutes pop-up of fluctuating fuel prices information.

What Is The Future Of Bunker Fuel Surcharges?

Recently increase of questions of who will take the burden of the fuel costs is increasing. Should the shippers or the carriers take the burden?

With these rising issues, there is a need to develop new strategies to provide long-term solutions for Emergency Bunker Surcharges. The shippers want the carriers to be responsible for these charges.

They claim the carrier uses an Emergency Bunker Surcharge to compensate for the losses and not the bunker.

Note, the carriers do not have control over the fluctuating fuel prices. Therefore, they use the EBS to cover the losses.

At BanSar, we help in all shipping from China.

Contact us today for all freight forwarding services from China.

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