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Freight charges calculation includes the fares that occur before, during, and after the transit of the shipment. The freight charges for the trade thrive with competitive margins for the sellers and the best deals for the buyers. The movement of the cargo from the arrival to the departure constitutes the cost of the mode of transport whether air, sea or road, the category of the cargo with or without container along with other factors like distance, time of the year, the weight of the shipment, for heavier loads there may be airlifts usage, and other costs like insurance, customs clearance taxes, port handling fees, packaging fee, documentation charges, and currency conversion fees.
Due to the booming international trade, the courier services like UPS, FedEx, and USPS are leading in 2020 they topped the charts due to their reasonable pricing, flexibility in cargo loads, and convenience to the customers.
Analysis of Shipping Costs
The total shipping cost is arrived at by calculating the cost from the warehouse, packing to courier pick up till the completion of paperwork or formalities at the port at the place of origin and the destination, the bills of lading charges and product delivery along with the freight forwarders fee jointly conclude as the shipping cost, in the end, the landed cost is calculated by adding to the primary product price.
Port handling Fee
While calculating the shipping cost the port handling charges can be taken as actuals as they are non-negotiable, there are terminal charges levied on the shipment based on the weight and the size of the containers the tariffs must be studied carefully by the sellers.
Customs charges
Every country has a set of tariff for both import and export goods the freight forwarders will guide you while calculating the customs charges on every product, these taxes vary for door delivery service as it includes customs charges at destination and clearance tax at the port.
Insurance and certification
Factoring insurance cover in the shipping cost is a must as it protects the business from facing huge losses in case any damage occurs during the transit. It is important to know the estimates of the products accurately so that the insurance claim is properly covering the product for the total value.
Landed Cost:
For businesses that work and deliver goods internationally shipping fees are the major component in the invoice. To save more money on the shipments every business needs to have in-depth knowledge of all the costs pertaining to the freight.
Landed cost includes all the costs that occur right from the departure of the shipment till it reaches its destination. This is the final cost of the product a clear understanding of the cost chargeable on each item will give the buyer an idea of the total shipment. The buyers must be therefore prudent of all the costs associated with the shipment. Landed cost is calculated by adding all the overhead costs plus charges from the warehouse to the client. By dividing overall cost by per unit cost you will get landed cost per unit.
Calculating unit freight cost
The weight and the volume define the freight cost for one unit in a shipment but if the shipment has heterogeneous units then packaging and mode of transport also must be included in the calculations.
To determine freight cost via sea and rail transport factors like the size of the container, weight, and volume of the load and terms of usage i.e., FCL or LCL are considered.
Charges for the reefers and the containers are varied, variations of the containers can be 20’, 40’ either open top or closed. Charges like the demurrage fee may be applied for the FCL option as the LCL option provides a free or grace period during which these charges may not be applied.
By checking out the rates from various carriers the freight cost can be calculated and a comparative study will help you choose the best deal.
Sea freight per unit
Sea transport has low shipping cost as compared to Air transport while it is advised to opt for Sea transport for large shipments this mode is convenient to use for low urgency consignments. Sea freight rates are inclusive of documentation, actual freight, container demurrage plus customs and other taxes at the port.
Full Container Load (FCL)
Full Container Load shipment provides the shipper an entire empty container to be filled with cargo then it can be returned at the dock. The type of cargo, the destination, and container load plus size will determine the cost and every shipping line has a tariff for the cargo. The containers can take a load of a maximum of 40 tons for 40 units.
Less Container Load (LCL)
This option is useful when your shipment does not require a full container, the weight and volume of the load will decide the freight rates on a prorated basis. The consolidators will pack all your goods in a container which is reflected in a single sea freight bill of lading, shipper must check the breakdown of the bill to know the landed cost of his goods.
Sea freight quotation
The following are the charges applicable in a sea freight quote:
- Basic sea freight
- Inland haulage as per requirement
- Documentation charges
- Bunker adjustment fee
- Terminal handling fee
- Currency adjustment charges
- Customs clearance
Cost-effectiveness and Actual cost after arrival
For FCL shipments, packing all the necessary goods and filling the container will lower the cost per unit, For LCL packing goods mindfully based on weight and volume will give fair landed pricing.
Once the shipment is arrived calculate the actual cost per unit and derive the exact freight rate adding inland haulage if involved. This exercise will guide you in future shipping calculations.
Today as the world works totally on the internet the e-commerce business has taken the supply chain management to a next level. To improve your business online you need to be cautious about the shipping rates, lowest shipping fees will make your business lucrative. For regular shipments, courier services are a better choice as they offer considerably discounted pricing.
