Understanding Different Types of Charges Involved in the Overall Freight Charges

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Business

The process of shipping goods from one place to another is not as easy as it sounds. Out of all the factors, the biggest concern of shippers is the freight charges that are imposed on the goods they are transporting. Most of the time, shippers don’t pay much attention to the freight rates and later get shocked when the additional costs are presented to them. This post contains all the information you need to know about freight rates before scheduling your shipment.

Freight rates are the charges one needs to pay for transporting goods from one location to another. 

What Are Freight Rates? 

Freight rates are the charges that the shipper needs to pay in order to deliver goods from one location to another by a carrier. The rates depend heavily on the transportation mode you select for shipping your goods. Not just that, the total weight and type of goods is also taken into account while determining the freight charges. Further, the transportation mode can be either a ship or an airplane or the roadways. 

Major Factors Affecting The Freight Pricing

The cargo charges keep varying depending on a number of factors given below :

1. Distance

The first factor that greatly impacts the freight charges is the distance that needs to be travelled. The idea is simple, the greater distance your goods will travel, the higher charges will be imposed on them. 

2. Volume and Type 

The next important thing affecting the freight charges is the weight and type of the goods. Usually, the dimensional weight is calculated for determining the final charges. The dimensional weight is calculated by taking into account the volume and weight of the goods. Also, the volume of goods is considered to determine how much container space your cargo will take. 

3. Shipping Type 

The two major types of shipping methods include FCL (Full Container Load) and LCL (Less Than Container Load). With FCL, you use an entire container to ship your goods, so the charges will depend on the rate of the container. On the other hand, you can share the space of a container with other shippers, using an LCL agreement. If your shipping volume is very less, LCL will be an affordable option. And if you’re sending goods over 14 CBM, then FCL is best. 

4. Tax and Duties 

Next, your freight rates will also fluctuate on the basis of taxes and Customs duties. These are different for different goods and different locations. So, make sure to know about these charges before sending your shipments. 

5. Season 

Freight rates also depend on the season you’re shipping. Generally, the rates are higher during the peak seasons, which are usually from August to November. During these months, shipment demand remains very high and this reflects in the higher rates. You can save a good amount if you send your shipments during the off-seasons. 

That’s all about the factors affecting the freight rates. Now, let’s talk about the different types of charges involved in overall freight rates:

Different Types of Freight Charges

1. Consignee Pays 

The consignee or the receiver pays for the delivery charges after receiving all the goods. They are also responsible for the customs declaration, a statement that signifies that the goods are imported in the right condition. They file necessary taxes and also take care of some documentation. 

2. FOB Origin

FOB stands for Free on Board. It states that the supplier pays for the overall shipping cost till a particular destination and after that, the rest of the shipment charges will be handled by the buyer. If the goods get damaged in the transition under the buyer’s responsibility, it will be on them. The same goes for the suppliers. 

3. FOB Destination

Under this agreement, the freight rates are paid by the shipper once the goods are released from the destination terminal. In this case, the rates are prepaid, which means they are paid in advance before cargo is shipped.

4. Prepay and Add

In this case, the payment of shipment is carried by the shipper which they later collect from their customers in the form of shipping charges. This payment option works well only if the customer and consignee are on good terms. 

5. Cash on Delivery

Cash on delivery is the charge that is paid by the carrier once the goods are delivered. Here, the carrier gets reimbursed by the shipper later. 

6. FOB Origin, Charged Back and Freight Prepaid

In this agreement, the consignee is responsible for the cargo, while the freight rates are paid by their agent who’s present on the origin. They later get paid by them. 

7. FOB Destination, Freight Collect, and Allowed

Once the goods reach the final destination, the consignee pays for the freight rates plus the charges imposed by the carrier. Here, it’s the consignee’s responsibility to take care of all the payments and settlements. 

Among all types of freight rates, consignee collect remains the most common form of charges. It means that the person who is transporting the goods is responsible for paying all the charges. So, as a business, you only need to pack and send your goods to your transporter, they will take care of the rest.