Ocean freight surcharges explained: BAF, LSS, THC, PSS, GRI, EU ETS
A sea freight quote is rarely just the base rate. Carriers add surcharges for fuel, low-sulphur fuel, emissions, terminal handling and busy seasons, and many change monthly or quarterly. Knowing what each line means, who pays it under your Incoterms rule and whether it is fixed in your quote avoids surprises on the invoice.
Checked against official sources: 2026-10
At a glance
Fuel and environmental surcharges
- Bunker surcharge (BAF): covers fuel cost and moves with fuel prices. Hapag-Lloyd's version is the Marine Fuel Recovery (MFR) surcharge, valid for both directions and shown separately on the invoice.
- Low sulphur surcharge (LSS) or IMO 2020 charges: since 1 January 2020 ships outside emission control areas must use fuel with at most 0.50% sulphur, down from 3.50%, and 0.10% inside emission control areas such as the Baltic Sea and North Sea. Compliant fuel costs more, and carriers recovered it through separate charges.
- EU ETS surcharge: since January 2024 the EU Emissions Trading System covers CO2 from ships of 5,000 gross tonnage and above calling at EU ports, with methane and nitrous oxide added from 2026. Carriers pass the allowance cost on as an emission surcharge; Hapag-Lloyd invoices its Emission Allowance Surcharge separately, with amounts that depend on direction.
How the EU ETS cost grows
The European Commission explains that shipping companies surrender allowances for 40% of their 2024 emissions (in 2025), 70% of their 2025 emissions (in 2026) and 100% from 2026 emissions onwards. Emissions on voyages between EU ports and at berth count in full, and voyages starting or ending outside the EU count at 50%. As the covered share grows, carriers' ETS surcharges on EU trades tend to rise.
Port, season and rate changes
- Terminal handling charges (THC): charged at the origin and destination terminals; under FOB the seller usually pays origin THC and the buyer destination THC, but check the contract and the Incoterms rule.
- Peak season surcharge (PSS): added when demand is high, often announced a few weeks ahead.
- General rate increase (GRI): an announced increase of base rates on a trade from a given date.
- Other lines you may see include security charges, dangerous goods surcharges and fees for extra free time at destination.
Step by step
- Ask for an all-in quote that lists every surcharge separately, with the validity date.
- Check which surcharges are fixed for the quote's validity and which apply "as at time of shipment".
- Match each charge to the Incoterms rule: under FOB or FCA the buyer pays the main freight and its surcharges; under CFR or CIF the seller does.
- For EU trades, budget for a rising EU ETS surcharge, since the share of emissions covered grows to 100% from 2026.
- Compare quotes on the total, not on the base rate alone.
Documents you usually need
- Freight quotation with surcharge breakdown
- Booking confirmation
- Freight invoice
- Carrier tariff or surcharge notice
- Sales contract with the Incoterms rule
Common problems and how to avoid them
What to do: Surcharges such as BAF, ETS and PSS are often added at the rate valid on the shipment date; ask for an all-in rate with a validity period.
What to do: Settle it in the sales contract along with the Incoterms rule, and show it on the quote.
What to do: It is legitimate: half of the emissions of voyages into or out of the EU fall under the EU ETS; compare amounts between carriers.
What to do: Check the booking terms; carriers announce PSS and GRIs in advance, and fixed all-in rates avoid them.
Sources
- Reducing emissions from the shipping sector European Commission
- IMO 2020: cutting sulphur oxide emissions International Maritime Organization (IMO)
- Trade surcharges Hapag-Lloyd
Rules change often. This note is practical guidance based on the sources above, not legal advice. Confirm current requirements with the authority, your importer or a licensed customs broker before you ship.
Trade notes
Common questions
What is BAF in shipping?
The bunker adjustment factor, a surcharge that covers fuel costs and moves with fuel prices; Hapag-Lloyd calls its version the Marine Fuel Recovery (MFR) surcharge.
What is the EU ETS surcharge?
A surcharge that passes on the cost of EU emission allowances, which ships of 5,000 gross tonnage and above need for their emissions on voyages to, from and within the EU since 2024.
Why are EU ETS surcharges higher in 2026?
Allowances cover 40% of 2024 emissions, 70% of 2025 emissions and 100% from 2026 emissions onwards, and methane and nitrous oxide are added from 2026.
What is IMO 2020?
The rule limiting sulphur in ship fuel to 0.50% outside emission control areas from 1 January 2020, down from 3.50%; inside emission control areas the limit is 0.10%.
Who pays THC?
It depends on the contract; usually the seller pays origin THC and the buyer destination THC, but the sales contract and Incoterms rule decide.
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