How do freight forwarders charge for their services?
There are numerous elements involved in shipping, which means that calculating the cost of a freight forwarding service isn’t straightforward. You’ll also find that some freight forwarders include certain costs in their upfront quote, while others offer them as an optional add-on. In some cases the freight forwarder might not offer a particular service at all, leaving you to make other arrangements at your own cost.
It’s essential that you get a full breakdown of what’s included in a quote before you engage the services of any freight forwarder. A reputable forwarder will have no issues with providing you with a clear itemisation, which will allow you to compare quotes for real value, rather than cost.
To give you an idea, here’s a breakdown of the elements of shipping that need to be paid – whether they’re included in a given quote or not is for you to confirm with your chosen forwarder.
Whether you choose to have your goods shipped by air, sea or road, the mode of transportation has to be paid for. As a general rule of thumb, sea freight is the cheapest and air freight is the most expensive. The distance travelled will affect the cost – although it doesn’t always follow that a greater distance equals a greater expense. The rules of supply and demand may mean that a freight forwarder can negotiate lower carrier costs on popular routes, while less popular routes with fewer carriers to choose between provide less opportunity for negotiation.
When shipping by sea, you’ll either be charged for a full container load (FCL) or a less than container load (LCL). Choosing LCL may work out cheaper if you don’t have enough cargo to fill a container, although this means that you’ll be sharing your container with other shipments and there’ll be a cost involved in separating these shipments at the destination port.
Similarly, with air freight, your goods will be packed into a Unit Load Device (ULD), which can come in the form of a pallet or container.
Type of Cargo
Some types of cargo cost more to ship than others, this could be because they require a specialist kind of container, such as perishable goods, or they require more careful handling, such as dangerous goods. Goods that don’t fit in a standard container or that need a crane or other specialist equipment for loading and unloading will also be more expensive to ship.
Weight and Volume of Cargo
The size and weight of your cargo can both impact the cost of shipping. The chargeable weight of a shipment is calculated by converting the volume into a weight equivalent. The chargeable weight is then whichever is greater, the actual weight or the calculated volumetric weight. Essentially, two shipments can weigh the same, but the one that takes up more space will cost more to ship.
Palletisation and Packaging
When importing and exporting, goods are required to be palletised and packed in a specific way, and any wood used is subject to international legislation. Some freight forwarders offer a packing service at an additional charge, so you can be sure that your goods are compliant with the government regulations applicable at the destination port. Having goods returned to the port of origin for re-packing can be very costly!
A fuel surcharge may be applied by the carrier to protect them from fluctuations in fuel costs – this can also be known as a Bunker Adjustment Factor (BAF). A carrier may also apply a Currency Adjustment Factor (CAF) to protect them from fluctuations in currency, a war risk surcharge, a security surcharge, a peak season surcharge or a demurrage penalty for delayed loading or unloading.
While carriers are legally required to have carrier liability insurance, this can provide minimal coverage, leaving your goods vulnerable. It’s wise to protect your shipment with cargo insurance, which many freight forwarders offer as an add-on service. Ask your forwarder whether insurance is included in the quote or available as an add-on. If your forwarder doesn’t offer cargo insurance, you’ll need to purchase it directly from an insurer or broker.
A freight forwarder will usually complete the required documentation, such as the Bill of Lading, invoice and import and export documentation, for you. An admin charge for this service will typically be included in the upfront quote. Goods that require special paperwork, such as dangerous or restricted goods, are likely to incur an additional charge.
There are numerous destination costs involved in the shipping process, including charges for handling (terminal handling charge) and clearing the goods at the loading and discharge ports. A port may also impose an additional security surcharge. Other potential destination costs include unpacking (in particular the cost of splitting LCL shipments), warehousing fees and the cost of inland haulage if required.
Using the services of a freight forwarder will save you the time and hassle involved in organising, coordinating and managing the different elements of the shipping process. But, of course, the forwarder doesn’t carry out this service for free, and an administration charge will form part of their quote.
Some freight forwarders offer additional services to take care of the shipping process from end-to-end. For example, John Good Shipping offers product sourcing, packing and packaging, unpacking and sorting, warehousing, distribution and delivery to the end customer.
When comparing different freight forwarding quotes, it’s important to know exactly what’s included so you can compare like for like and understand which quote provides the best value for money.