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International freight costs: What goes into them?

In Freight Posted June 21, 2022 at 5:08 pm
By Edi Lenkic

International Freight Costs

It stands to reason that international freight costs are hard to understand, after all, freight forwarding is a complex process. For you to move your shipment from the factory to its final destination, forwarders deal with as many as 25 different entities (customs, terminals, shipping lines, forwarders, authorities, etc.)

Take a typical job – from China to Australia. The multiple shipping lines, port pairs, container types, INCOTERMS and customs charges are just the beginning. Add in terminal charges, local delivery charges, surcharges and discounts, and it’s no wonder a typical door-to-door spot freight quote contains more than 20-line items.

Each freight forwarder has its own way of doing business and its own list of charges. Some fees are standard for all forwarders and easily recognised. Others have different names or are buddled in with other charges. There are some international conventions around shipping, but many countries have local variations.

The expression about apples and oranges has never been truer than for freight forwarding, nor the adage that you get what you pay for.

On the surface, a freight quote that seems low can have hidden extra charges, or it might be an introductory rate that soon escalates.

Factors freight forwarders consider when preparing a quote.

  • The type of cargo to be shipped. Suppose your product is perishable, oversized, or Dangerous Goods and requires a particular container or careful handling.
  • For LCL and airfreight weight and volume are a factor. We determine the cost of shipping your cargo by comparing the actual and volumetric weights. You will be charged whichever is higher. Light, bulky cargo such as packaging products may cost more to ship than something dense but small, like jewellery.
  • Mode – sea freight, airfreight, Air/Sea, LCL etc. Sea and airfreight are self-explanatory, and it stands to reason that sea freight is cheaper than airfreight. An Air/Sea option suits non-urgent airfreight or urgent seafreight and can reduce your overall transportation costs and transit times by at least 50%.
  • The origin and destination ports. A few factors influence this cost: distance travelled, the busyness of the tradelane, the range of services available, capacity in the market. Sending something over long distances costs more than over shorter ones. But more frequently travelled routes tend to be less expensive due to competition among services. Sometimes sending goods further might be cheaper. Cargo can be trucked to busy freight hubs to speed up transit times and reduce costs. Your goods can be shipped LCL – Less than Container Load. LCL shipping is a flexible option to help shippers save money and manage their inventories. Magellan manages a consolidation program from strategic loadports.
  • Transit times – direct or transhipment. If your cargo isn’t needed urgently, you may save money by sending it on a slower service – insome instances.
  • Final destination. How from the port or airport is your warehouse? Do you need split deliveries? LCL cargo requires handling before delivery to your final destination.

How do freight forwarders charge for their services?

Origin Charges

Origin charges are for services provided before a shipment has departed its origin. These may include a CFS fee, export customs clearance or origin document fees and local transport. Who is responsible for the origin charges depends on the INCOTERM under which the shipment moves.

Freight

Shipping or freight fees depend on the shipping lines rate per container and myriad other charges. For general sea freight, there are two sizes of container:

  • 20-foot equivalent (TEU)
  • 40-foot equivalent (FEU)

Where your shipment is packed is dependent on its size. But what if you don’t need a whole container? Your cargo can be shipped LCL – Less than container load. LCL shipping is a flexible option to help shippers save money and manage their inventories. Magellan manages a consolidation program from strategic loadports.

  • Bunker Adjustment Fee
  • Low Sulphur Fuel (LSR) adjustments
  • Currency Adjustment Factor (CAF)
  • Bill of Lading documentation fee. A separate fee to the B/L Port Fee

There are other expenses charged under certain circumstances, such as:

  • Detention or Demurrage Fees (late fees for container returns to the shipping lines), and wharf storage for exceeding free time at the port.
Arrival Charges
  • Port Charges
  • Terminal Handling
  • Port License Fee / Security Surcharge
  • Port Service Fuel Surcharge (for LCL)
  • Documentation Fees
  • Bill of Lading (B/L) Fee
  • Vehicle Booking System Fee
  • Equipment Maintenance Charges (for some shipping lines)
  • Hazardous Lodgement Fee – if applicable
  • Port Storage Fees – if applicable
  • Sea Cargo Automation
  • Wharf Infrastructure Fee

Once a delivery arrives at the destination port, it will require clearance through customs before delivery.

There are several charges associated with Customs clearance.

Customs Clearance Fees
  • Quarantine Charges
  • Inspection Fees
  • Customs Agent Fees
  • Customs Electronic Fee
  • ACS Compliance Fee
  • Fumigation Fees
  • Duty

Customs charges relate to the contents of a shipment, the country of import and its laws. For example, additional fees will commonly be payable on shipments of alcohol, tobacco, or animal origin products.

For goods with a shorter shelf-life, it may be beneficial to pay priority inspection fees to expedite customs clearance.

Cartage Fees

After your shipment has arrived and cleared Customs, it is delivered to your premises. Cartage charges consider the type of truck/trailer required and the facilities at your warehouse and include:

  • Distance
  • Delivery fuel surcharge
  • Road tolls
  • Weight of the container (heavy weight surcharges can apply to dense cargo)

How do you calculate international freight costs?

How is sea freight calculated?

The container size determines the FCL sea freight. Generally, a 40’ will be 2 x the cost of a 20’. Rates are market-driven and are usually only valid for a month.

LCL sea freight is charged by cubic metre. Forwarders will consolidate freight from various shippers into an FCL or all one shipper’s cargo from multiple suppliers into a Buyer’s Consolidation and ship to the destination. Port charges are higher for LCL if the volume exceeds a certain amount.

How are airfreight rates calculated?

Carriers calculate freight rates volumetrically (or dimensional weight) or by actual weight.

Volumetric weight is calculated by multiplying the cargo’s volume in cubic meters by 167. The volume of 25 boxes (each weighing 7kgs) measuring 35cm x 35cm x 35cm is 1.072cbm. When you multiply by 167, you get a volumetric weight of 179kg, where the actual weight is 175kg. In this instance, volumetric weight is charged.

Get in touch to discuss your international freight costs.

Magellan Logistics provides freight and logistics services to all industries, including sea freight, air freight, and domestic and customs clearance. Get in touch with one of our freight specialists today.

 

Sources:

https://goodlogisticsgroup.com/freight-forwarders-charge-services/
https://www.freightos.com/freight-resources/freight-forwarder-calculating-costs-and-fees/
https://www.magellanlogistics.com.au/freight-rates/

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