Freight Calculation
1. Ship Freight
1) Terms: 1. Basic rate, basic freight charges on the goods per charging unit (like 1 freight ton). There are class rate, type rate, ad valorem rate, special rate and uniform rate. Ship freight is made up of basic rate and surcharges. 2. Surcharges: to keep the stability of basic rate in a given period, and to reflect the freight cost of goods in ports, ship companies have other charges besides basic rate.
Including: 1) Bunker surcharge of bunker adjustment factor – BAF, which is charged when the oil price increases. 2) Devaluation surcharge or currency adjustment factor- CAF. To ensure that the ship company’s income does not decrease when the currency depreciates, a certain percentage of surcharges based on the basic rate will be charged. 3) Transshipment surcharge. For those goods transferred to a non-base port thus needing transship to the destination port, the ship company will collect some surcharges including transshipment charges and second carrier charges. 4) Direct additional. When the goods shipped to a non-base port reach a certain amount, the ship company may collect some charges for arranging a direct trip to the port instead of transshipment. 5) Heavy lift additional, long length additional and surcharge of bulky cargo. When a piece of goods’ net weight, length or bulk reaches or surpasses an allowed level, some charges will be collected. 6) port additional or port surcharge. The ship company may collect some charge if a port is ill-equipped and inefficient in unloading or for other reasons. 7) Port congestion surcharge. Some port are crowded causing longer stay, thus some charges are collected. 8) Optional surcharge. If the consignor has not decided an unloading port, the ship company can charge for choosing between two or more ports to unload. 9) Alteration of destination charge. IF the normal course is jammed and the ship has to take a detour to the destination, the company can collect some charges for that.
2） Basis/Unit for freight calculation: It may be based on goods weight, and dimension or volumes, and a more expensive one will be chosen to charge. A certain percentage of the goods FOB will be collected as ad valorem freight, charged per piece. If the charge is discussed on the occasion, it is called an agreed price.
3) Freight calculation process: 1) choose a relevant tariff rate 2) find the freight calculation basis and class in the goods classification table according to the name 3) find the ship line, the origin port and the destination port and the corresponding basic freight rate in the basic freight rate part of the table.
4) Find all the surcharges that are to be paid and the amount (or the percentage), and the currency type. 5) Calculate the actual freight rate with the basic freight and the surcharges. 6) freight rate = rate * freight ton
If there are clauses about the freight rate in the lease contract, it should be calculated according to the price per unit weight or volume, and some may have the lumpsum freight. The rate depends on the supply and demand of the charter market, the shipping distance, the type of goods, handling percentage, use of the port, classification of handling charges and commissions. It should be made clear in the contract whether the freight rate is calculated according to the intaken quantity or the delivered quantity, paid in advance or on delivery. What’s worth noticing is the freight rate payment time is the time the ship company gets it or the time the hirer pays it.
Classification of the handling charges: 1) the ship company affords the charge, called gross or liner or berth terms. 2) Free in and out – FIO. Under this situation, it should be made clear whether it is FOB stowed and trimmed. Usually, the hirer affords the charges, i.e. Free in and out, stowed, trimmed. 3) Free out 4) Free in.
3. Container shipment rate.
Currently, the system of shipment rate of container is more developed than the system of land transport rate. There are basically two kinds. The first is bulk rate, calculated on every freight ton. The second is box rate, calculated on every container.
1. Bulk rate plus surcharges
1) Basic rate- based on traditional bulk rate, calculated per freight ton. Many ship lines adopt hierarchical rate.
2) Surcharge- Beside the common surcharges of traditional bulk rate, some other container goods transportation charges will be collected.
2. Box rate- Such rate is calculated per container and used under container delivery conditions, i.e. CFS-CY or CY-CY clauses. It may have the following forms:
1) FAK (Freight for all kinds) box rate- charges collected on the whole container regardless the kinds of goods or the amount (within the limitations).
2) FCS (Freight for class)- Box rate determined by different classes of goods. The classification of common container goods is the same as in bulk transportation, including 1-20 classes. But the gap between the rates of container goods is much smaller than that between the rates of bulk transportation. Usually the low class container is charged more than traditional transportation, and container of expensive goods less than traditional transportation. For goods of the same class, the heavy goods container is expensive than the volume goods one. Thus, the ship company encourages people to ship their expensive and large size goods in containers. Under this rate, the calculation of the goods in containers is the same as traditional ways. You find the class according to the name of the goods, work out the standard and match it with the corresponding rate, multiple it with the freight ton and then get the freight rate.
3) FCB (Freight for class or basis)- This rate is formulated with an eye to the class or the type of the goods.
Air transport
1) Chargeable weight: Airlines stipulated that if the goods are small but heavy, the charge is based on the weight; and when the goods are big but light, the charge is based on the volume. When consigned, a batch of goods may be made up of several pieces of goods, including light and heavy ones. The charge then is based on the overall net weight or overall volume of the goods, and the expensive one is chosen.
2) Freight rates and charges of airlines.
1. Rates: The carrier will charge the goods according to the weight or volume, which is called rates. Rates are between to airports, not including other charges collected by the carrier, the agent and the airport.
2. Transportation charges: The consignor or consignee should pay for the delivered goods, which is calculated according to an applicable freight rate.
3. Airlines will collect international airline freight charge according to the rates in three areas divided by the international airline transportation association. Area 1 includes America continent and Greenland, etc; Area 2 includes Europe, Africa, Iran, etc. Area 3 includes Asia and Austria.
4. The freight rates of airline freight mainly includes: 1) General cargo rate, 2) Special cargo rate, specific commodity rate, 3) Cargo class rate, 4) Unitized consignments rate.
5. Basic rate: the lowest rate an airline would accept when transport goods. Regardless of the weight and volume of the goods, it is the smallest amount charges for goods between two points. In different areas there are different basic rates.
6. Other rules on freight rates: Different air freight rates and charges have something in common. 1. Freight rate means from an airport to another, applicable only in one direction. 2. Other additional charges excluded, like delivery, customs declaration, storage, etc. 3. Freight rate is usually in local currency. 4. Freight rate is calculated in kilograms and pounds. 5. Freight rate of air transportation is the rate on the day the order is presented.
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