What Are Freight Charges?
Freight charges are the fees that a shipping company applies for transporting goods to their destination. The person requiring the shipment of items from one location to another bears the cost of these charges. How much you pay for freight depends on the mode of transport chosen, be it ships, planes, trains, or trucks.
Selecting a Freight Forwarder
When you select a freight forwarder, remember that they set prices based on the weight of your cargo. Expect to pay more for anything that’s particularly large or heavy.
4 Key Factors That Influence Freight Charges
Freight charges are a crucial expense for any inventory-based business. The cost of moving items from the manufacturer to the warehouse can fluctuate for various reasons. Whether these shipping expenses are settled before or after delivery can also vary. We’ve detailed these in our extensive blog on shipping rate factors.
Consider These Elements:
Fuel Prices
Transportation costs often hinge on the cost of fuel. Both road and maritime shipping fees reflect the current fuel rates at the time of transport. Low fuel prices can mean cheaper shipping and savings for the customer. Conversely, when fuel prices climb, expect to see an uptick in land and sea freight costs passed on to you.
Demand Fluctuations
The push and pull of customer demand directly affect freight rates. High demand for shipping space means more competition for that space and higher prices. In slower times, shipping companies might lower their prices to attract the fewer customers shipping goods.
Unexpected Events
Issues like terrorism, piracy, or unstable governments can drive up freight costs as shippers compensate for losses and avoid risky areas, opting for safer, yet longer, routes. This not only affects the route but also increases insurance premiums due to heightened risks.
Regulatory Changes
Government regulations can also play a part. Restrictions on truck drivers’ hours, for instance, can delay deliveries, prompting carriers to raise prices to offset the slower transit. Other government-imposed factors might include night-time driving bans, emission taxes, and limits on cargo loads.
Understanding different Freight Charge Terms
Let’s break down the terms you’ll come across when dealing with freight charges
Consignee Collects
The consignee is the recipient of the shipment. They’re on the hook for all related charges upon receipt, including customs declarations and taxes. Confused about taxes and duties? We’ve got an article that clears that up.
Prepaid and Add
Here, the sender covers the freight costs upfront and later bills the customer. This method relies on a strong relationship between the shipper and customer, ensuring the shipper can recoup the costs.
FOB Destination
The shipper pays the freight charges and retains ownership until the goods reach the consignee’s location. These charges must be settled before the shipment is sent.
FOB Origin
Under FOB Origin, the seller pays transportation costs only up to a certain point. From there, the buyer takes on responsibility, including any damage to the goods during transit.
Freight Prepaid and FOB Origin
Similar to FOB Origin, but the shipper handles local charges while the consignee is accountable for the cargo.
Freight Collect and FOB Destination
The buyer gains ownership and responsibility for all expenses upon delivery.
Cash on Delivery
The carrier collects shipping fees upon delivery, which the shipper then reimburses.
Allowed, FOB Destination, and Freight Collect
Upon arrival, the consignee pays the carrier for freight and local charges. They’re also liable for settling all costs at the destination.
FOB Origin, PrePaid Freight, and Chargeback
The buyer is in charge of freight costs, paying them through an agent at the origin. The shipper then invoices these charges to the consignee.
Essentials When Shipping from China
When you’re shipping from China, understanding the term Free on board (FOB) is key. FOB doesn’t tell you who owns the cargo; it’s a legal term that clarifies the seller’s need to get the goods to a ship.
FOB Details
It pinpoints where the seller’s responsibility for the freight ends and the buyer’s begins, especially regarding shipping fees. Generally, the seller ensures the goods reach the ship, and from there, the buyer pays to bring them to their own doorstep.
Ownership Clarity
The actual owner of the freight is listed in the bill of lading (BOL), while the terms of sale outline who’s up for the freight charges.
For a deeper dive into import customs clearance documents, you can read this guide for more details.Â
Shipping Costs FAQ: Understanding Freight from China
Who pays the shipping freight costs?
Typically, the party responsible for freight costs is determined by the agreed terms of sale. It could be the seller or the buyer, depending on which incoterms whether it’s FOB origin or destination.
What’s the formula for freight charges?
Calculating freight charges involves considering weight, dimensions, distance, and the type of transport. Use our simple freight calculator to get an estimate.
Does ‘freight’ mean the same as ‘shipping’?
No, ‘freight’ usually refers to the bulk transportation of goods, while ‘shipping’ can mean the transport of goods in smaller quantities. Both terms are often used interchangeably in logistics.
How do I reduce air cargo fees?
To cut down on air cargo costs, try to consolidate shipments, opt for less urgent delivery speeds, or consider alternate airports for shipping.
What do shipping agents in China charge for freight?
Shipping line agents typically have a variety of charges, including booking fees, container fees, and documentation fees. Always request a detailed quote to understand the full costs.