Freight shipping costs are the charges you pay to move your goods from one location to another. This depends on many factors. If you know how to calculate freight shipping cost, you can definitely save money during shipments. Let’s learn this because we have made this process easy for you.
Terms To Know For Calculating Freight Shipping Cost
Before moving towards freight cost calculation, you should know the terms used in this industry. Let’s take a look at these things as these will add up in the final calculation:
1. Base Rate
The base rate is the basic cost of shipping given by different logistic companies. It depends on the dimensions and type of cargo, the way of shipping, and the route length. When we talk about the dimensions, we will consider volumetric, chargeable, or gross weight for shipment.
2. Fuel Surcharge
In addition to the current fuel price, you have to pay a fuel surcharge. This surcharge will compensate for the varying fuel prices. It is commonly known as the Bunker Adjustment Factor (BAF).
3. Security Charges
The security expenditures secure your cargo from any damage or theft. Your consignment will be watched over from loading till the final delivery. If you want the safe delivery of your product, you should pay the security charges for it.
4. Handling Fees
It includes the cost to manage the cargo at the port to load and unload it. Plus, this also includes the warehousing or packaging fees.
5. Import & Export Tax
This tax is applied by customs of both countries where exports and imports are about to happen. Moreover, some additional charges like Currency Adjustment Factor (CAF) or tail-gate fees are also included in the total shipping price.
How To Calculate Freight Shipping Cost
We will do step-by-step calculations to estimate the rate at which shipping takes place. But, you should keep in mind that it may vary from location to location. Also, different companies have different shipping rates. Here are the steps:
1. Calculate Package Dimensions
The first thing is to know the height, weight, and length of your shipment. By considering these you can figure out the volumetric weight. If you measure your package in inches then you can calculate this weight as:
Volume = Length x Width x Height (inches)
Volumetric Weight = Volume / 366
Let’s take an example to understand it.
Suppose your shipment contains 20 packages. Each package has a length of 20 inches, a width of 30 inches, and a height of 40 inches. Its weight in kg is calculated by using the above formula.
Volume = 20 inch x 30 inch x 40 inch
= 24, 000 inch3
Volumetric Weight = 24, 000 inch3 /366
= 65.5 kg
Now, you have a total of 20 packages and each one has a 65.5 kg weight. Therefore, you have to calculate the total weight of all the packages.
Total weight of shipment = 65.5 x 20
= 1,310 kg
It is the total weight that you want to move from one country to another. On the other hand, find out the freight class as it also affects the rates.
2. Get Quotes
Now contact various shipping companies and get quotes. Ask them the shipping cost according to per kg. Assume the least cost per kg is $2 then multiply it with your total weight. It comes out to be:
Per kg cost = 1,310 x $2
= $2, 620
This is solely the shipping price without any other charges that we have discussed above.
3. Estimate The Total Cost
Now you have to add all the other charges into $2,620 to get the final price. These include fuel surcharge, security charges, handling fees, and import/export taxes. You will get a rough estimate of the total price. However, these may fluctuate from company to company.
You can apply this general formula:
Total Shipping Cost = Shipping cost per kg + Fuel surcharge + Handling fee + Security charges + Customs Taxes
Commonly fuel surcharge is ten percent of per kg cost. However, suppose the handling fee is $40, security charges are $50, and other taxes cost $100. So, by putting the values, we get:
Total Freight Cost = $2, 620 + 10% x $2 kg + $40 + $50 + $100
Total Cost = $ 2,810
This is the final price you have to pay for the shipping cargo from your place to the destination.
Factors Affecting Freight Costs
There are various factors that influence the calculation of freight shipping costs for your cargoes. Let’s have a look at each of them:
- Freight Dimensions: The length, height, weight, and volume of the consignment are the freight dimensions. If your goods are heavy and take up greater space, you have to pay more for them.
- Shipping Distance: The origin and destination of your shipment can decrease or increase the costs. Because, the longer the route, the more fuel will be consumed to cover it.
- Freight Class: Freight class is the classification system of goods into different groups. You have to identify your freight class before getting the shipping quote.
- Type Of Cargo: If the cargo you want to ship is general, then the shipment rates are not so high. Moreover, shipping charges for perishable products are generally high.
- Means Of Transportation: From the ocean, air, road, and rail, air freight is the most expensive. It is mostly used for fast delivery. However, the ocean and rail freight are economical and used for heavy cargo.
- Shipment Urgency: As you know some of the cargo is time-sensitive and must be shipped on an urgent basis. If your goods are of this type, you have to pay a high price for them.
- Economic Conditions: The fluctuating situation of the economy can cause an increase in the freight rate. It also depends on fuel prices and peak seasons.
How To Reduce Your Freight Costs?
- First of all, you have to negotiate rates with various freight forwarders.
- Each will give their rates and you have to pick the most economical option. In this way, you will get the best quote for shipping.
- The next thing is to choose the right shipping method according to your cargo. You can discuss this with our experts to pick the best route for your freight.
- Moreover, your packaging must be optimized so that no empty space is left. It will be costly for you if your package takes up more space than the original product in it.
- Therefore, customize its design according to your items to reduce shipping costs.
- Lastly, you should not ship on peak days to avoid delays and higher costs.
FAQs
Does Weather Impact The Shipment Costs?
Yes, bad weather can cause an increase in the shipment cost. Because it requires greater handling and protection of cargo from severe damage.
Is FTL or LTL Cost Effective?
LTL is more cost-effective than FTL in sea freight. The reason is that in LTL (Less Than Truckload) your cargo will not take up a full truck for shipping. But, in FTL (Full Truckload), a full truck is dedicated to your consignment.
Wrapping It Up
In the end, we recommend you to first calculate the estimated freight shipping cost of your package and then talk to different companies. They will give you multiple quotes and you will be in a position to analyze everything better. You can also contact BanSar if you want to import products from China.
