freight rate

8/7/2019 Freight Rate

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Freight Rate and FreightSurcharge



Factors governing freight rates and freight surcharge

Freight rate : The charge assessed by a freight carrier for

moving goods from one destination to another.

Freight surcharge : Additional charge added to the usual freight



I. CARGO RELATED FACTORS

1. Type of cargo

2. Weight , volume and density factors

3. Stuffing, loading and unloading of cargo

4. Stowability ± unusual shapes and sizes

5. Type of container



6. Brokerage or commission paid to freight forwarders.

7. Insurance costs

8. Inspection costs

9. Documentation, export and custom clearance costs

10. Storage and Demurrage cost



TRANSPORTATION RELATED FACTORS

1. Mode of transport

2. Type of service

3. Distance between destinations

4. Agreement between operators

5. Fuel costs

6. Bunkering costs (Bunker adjustment factor)

7. Competition and regulations

8. Operating subsidies by some countries



OTHER FACTORS

1. Currency Adjustment factor (CAF)

2. Special services

3. Profit margins



Currency Adjustment Factor (CAF)

In times of unstable currency, the freight rate is

often quoted with a currency adjustment factor

(CAF) to cover an additional charge for currency

appreciation.

Bunker Adjustment Factor (BAF)

The term bunker refers to oil. It may also refer to a

compartment on a ship for storing fuel, that is, oil inmodern ships and coal in old-time steamships. In times of

unstable oil prices, the freight is often quoted with a

bunker adjustment factor (BAF) to cover an oil price

hike.



Transportation cost analysis

COST STRUCTURE

Mode Fixed/Capital Costs Operating Costs

Rail or Highway Land, Construction Maintenance, Labor,Fuel

Pipeline Land, Construction Maintenance, Energy

Air Land, Field & Terminal

Construction, Aircraft

Maintenance, Fuel,

Labor

Maritime Land for Port Terminals,

Cargo Handling

Equipment, Ships

Maintenance, Labor,

Fuel



OTHER COSTS

1. Terminal management expenses.

2. Back - haul costs

3. Line - haul costs



Freight Optimization

1. Select best carrier option by rate comparision andnegotiations.

2. Long term contracts for frequent transportation.

3. Decrease line - haul costs by increasing the weight

shipped.

4. Consolidation of shipments offers following advantages:

- Reduction in terminal handling costs.

- Reduction in pick up and delivery costs.



Freight calculation

MT= metric ton

kg.= kilogram

lb.= pound

CBM= cubic meter

cu. cms. = cubic centimeters

cu. ft.= cubic feet

cu. ins.= cubic inches

The unit of ton being used in the freight cost calculation may differ among

carriers. It can be a metric ton (2204.6 lbs. or 1000 kgs.), a short ton (2000

lbs. or 907 kgs.), or a long ton (2240 lbs. or 1016 kgs.).

freight rate

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