The modern world is truly global and every business, whatever its scale or scope, relies on being able to move goods from place to place. And whether you’re shipping several thousand tons of bauxite or a single crate of roof hooks for ladders made from the resulting aluminum, it’s in your interest to understand how different shipping methods are charged and how those charges are calculated.
Road Transport
The versatility of road transport and the sheer range of loads that can be sent by truck mean that there are several different ways that road freight charges are presented. If your load fills an entire truck, you’ll get charged on the straightforward cost per mile, plus any surcharges for fuel. A quote will often also include ‘deadhead miles’, reflecting the distance covered by the truck when it’s empty to pick up the load. Bulk loads (that are unpackaged – like minerals, grain or aggregates) are usually charged by the ton-mile (so if you ship 20 tons 100 miles you’ll be charged 2000-ton miles at a rate per mile).
For smaller loads that don’t fill a whole truck by themselves (LTL – Less Than Truckload –shipments), shippers will usually decide how many standard pallet loads their vehicles can hold and then sell each of those ‘blocks’ of space. Exactly what each pallet costs to ship depends on the weight, volume and class of the commodity, which are then usually totalled on a per-mile basis. Finally, there are parcels, where large numbers of small consignments travel at the same time. As will be familiar to anyone who’s used their local postal system, these are usually charged at a cost per weight, with different scales for sizes of parcel.
Rail Transport
Today virtually all rail freight consists of either containers or bulk car loads – ‘less than carload’ shipments are all-but extinct since road transport can handle that business much more effectively. Because containers are a standardised volume and have a maximum weight, they are charged on a simple per-mile basis. If your load fills an entire rail car (or, more commonly, multiple rail cars with a single shipment of a single commodity making the same journey – such as coal from a mine to a power station) then the rail operator will provide a quote for a fixed cost per car (varied for the distance travelled, the speed of the shipment and any handling requirements) times the number of cars.
Sea Transport
The container revolutionised long-distance sea transport, and part of that revolution was that, as far as the shipping lines were concerned, the container itself became the cargo. So Full Container Load (FCL) shipments are based on the size of the container, plus any adjustments for specialist containers such as liquid tank or refrigerated one. Less than Container Load (LCL) shipments usually attract a base rate which is then multiplied by an amount determined by the weight of the consignment and any other factors such as the nature of the load and any handling or onward routing requirements.
Bulk shipments get charged by a formula called Time-Charter Equivalent (TCE), which rests on how long the customer is using the ship to transport their cargo. The charge is called ‘equivalent’ because it is calculated first based on cost per ton, then that is applied to a cost per day per ton amount that makes up the final price.
Air Transport
The key factor in sending anything by air is weight – aircraft are tightly limited in their payload and every bit of weight they carry affects performance and running costs. So charges are made either by the kilogram (and international standard for air freight) or the volumetric weight (effectively the ‘density’ of the shipment) and the carrier will work on whichever is greater.
