Understanding Freight Charges: Key Factors, Types, Calculation and More
Several industries, such as automobiles, manufacturing and distribution, pharma, etc., require moving high volumes of goods across their supply chains. Companies operating in such sectors rely heavily on freight forwarding services to transport bulk items cost-effectively.
Thus, if you are planning to open a business in one of these segments, you must have a comprehensive idea of freight charges, the factors that affect them, and their types.
Let’s dive deeper!
Freight Charges – Meaning
Freight charges are the expenses incurred for hiring a carrier company to ship goods to a specific location. This cost is usually borne by the individual or entity that wants to facilitate the transfer of goods.
The usual modes of transportation in this regard are aeroplanes, ships, trains, and trucks, and the total expenses tend to differ based on a variety of factors.
Major Factors Affecting Freight Charges
Following are some of the major factors that affect freight charges:
- Freight Method: Freight rates vary depending on the method of transportation you choose. Road and rail transport are usually the cheapest, while air transport is the most expensive.
- Freight Class: The freight class is a standard shipping industry pricing classification and measurement mechanism. It acts as a common ground for all LTL shipping carriers to determine the transportation charges.
Freight class usually depends on elements like:
- Freight density
- Ease of handling
- Stowability
- Liability
- Destination
The package’s destination also plays a major role in determining the freight costs. If the shipment requires special attention or handling, it will incur extra charges. Thus, the transportation charges will rise as the delivery difficulty increases.
For instance, if you need your consignment delivered to places like schools, churches, carnivals, establishments with high security, etc., the freight charges will be higher.
Exploring the Various Types of Freight Charges
Freight charges can be broadly classified into the following types:
Truck Freight Charges
The following are the components of truck freight charges:
- Truck Freight Rates: These are the base freight rates, which depend upon the demand and availability of trucks.
- Handling Charges: Handling charges are incurred when the shipper needs to sort and arrange the customer’s goods based on the route and urgency.
- Pick-up Charges: Pick-up charges are expenses the freight company charges for picking up the consignment from the consignor.
- Delivery Charges: Delivery charges are incurred for unloading, sorting, and handling the cargo before delivery.
- Main Leg Charges: Main leg charges are the actual transportation charges, including fuel costs, regional taxes, and toll taxes.
Air Freight Charges
Air freight charges can be classified into the following components:
- Security Surcharge (SSC)
- Fuel Surcharge (FSC)
- Customs Clearance Fees
- Container Service Charge (CSC)
- Airport Screening Fee
- Associated Trucking Fees
- Document Creation Fees
- Transport Document Amendment Fee (AMF)
- Cargo Insurance
- Gateway Transfer Fee
- Messenger Fee
Ocean Freight Charges
Ocean freight charges consist of the following categories:
Freight Category Charges
These charges include Ocean Freight (OCE), Interim Fuel Participation (IFP), Bunker Adjustment Factor (BAF), Currency Adjustment Factor, Origin Terminal Handling Charges (OTHC), and Origin Fuel Surcharge (OFUE) among others.
FOB Category Charges
These charges include Customs Entry (CUS), Collection Fee (COL), Cargo Data Declaration (CDD), Shipping Line Bill of Lading (BIL), Load, Lash, and Secure (LLS), and Demurrage Charges (DEM) among others.
Freight Charges: How They are Calculated?
Freight charges are usually calculated by taking into account the following elements:
Freight Density
Freight density refers to the weight of the space that your shipment occupies. It helps determine the shipment types and overall pricing.
Package Weight and Dimensions
The weight and dimensions of the consignment you are shipping play a major role in determining the freight charges. Generally, it is charged on a distance or weight basis.
However, if your shipment is LTL, the weight and dimensions of your package can greatly influence the freight charges.
Distance
Freight costs usually increase with the rise in the delivery distance. Thus, international or intercontinental deliveries generally cost a lot more than cross-country or regional ones.
Goods Type
Perishable, fragile, and high-value goods usually have a higher handling rate. This is because they may require special handling, additional documents, and even insurance to transport safely.
Shipping Mode
The shipping mode that you choose also has a profound influence on its price:
Less Than Truckload (LTL)
Your consignment does not occupy the entire trailer. Thus, the shipper can add multiple loads from other consignors into the trailer.
Partial Truckload (PTL)
A partial truckload is suitable for those cargo that occupy more than half of the truck’s storage space.
Full Truckload (FTL)
A full truckload is suitable for shipping those cargo that require the truck’s entire storage space for transportation.
Intermodal
Intermodal shipping combines multiple transportation methods.
Additional Charges to Consider about Freight Charges
Listed below are some additional charges that can add up to your freight expenses:
Fuel Costs
Like other markets, fuel costs can affect freight charges. As fuel costs increase, shipping charges will rise, and vice versa.
Accessorial Fees
Accessorial fees are incurred when your shipment requires special driver instructions. These may include private gate entries, residential deliveries, or redelivery requests.
Supply Chain Demands
When there is a sudden increase in demand for shipping due to shifts in the supply chain, freight charges will rise in tandem. Alternatively, if there is a fall in demand, freight prices tend to fall.
Now, freight charges also include last-mile deliveries. Thus, having a dedicated logistics partner is a must to ensure that you can facilitate on-time shipments to customers, that too at cost-effective prices.
Try out Porter Enterprise!
You can book a wide range of vehicles as per your delivery requirements and ensure door-to-door deliveries in all major cities across India.
Moreover, we do not have fixed monthly contracts. You pay us only for the time and distance you use our service.
Also, you get benefits like unlimited vehicle supply, 100% cashless transactions, and a centralised dashboard to track all your logistics activities from one place.
Download the Porter app now and make your last-mile deliveries seamless!
