Understanding Freight Costs In Detail [Our 2022 Directive]

Freight Forwarding: A Directive to Understanding Costs in Detail [2022]

It’s important to understand the pricing, fees and how your freight forwarder might structure their pricing in any shipping quote.

Costs can vary based on what you’re shipping, how far it has to travel, and how much you’re shipping.

When you utilise a freight forwarder, you’ll usually agree on a quote for the full procedure, from pickup to delivery.

While this may appear straightforward, these prices are made up of a variety of different elements.

Any quote should be itemised so that you can see what is and is not covered. Finally, the cost of freight forwarding will be determined by the quantity and scope of services you require.

In this freshly developed guide, you learn everything you need to know to help you make the best decision.

 

What is a Normal Freight Forwarder Cost Structure?

 

In this article, we’ll take a deep dive into understanding what a freight forwarder is, what a freight forwarder is not, what a freight forwarder does and how a freight forwarder serves its customers.

Freight forwarders often take advantage of new and uneducated shippers by offering a low price upfront only to incur endless charges later.

 

How Much Do Freight Forwarders Typically Charge?

 

There is no one-size-fits-all solution for freight, so evaluating and analysing the cost of a freight forwarder can be difficult. Being responsible for the organising and managing the worldwide movement (or shipping) of goods (or cargo) across international and domestic freight routes from one location to another is no easy task.

That is why, we would recommend having even an elementary idea of the costs involved when employing a freight forwarder can be wise, as it may help you save time and money.

 

Using a Cheap Freight Forwarder?

 

Everyone wants more bang for their buck from the things and the services they buy and freight forwarding is no different.

Most people are familiar with the idea of ‘buy cheap, buy twice’ – in other words, cheap things break or never turn out as expected, and you get what you pay for. But when it comes to coughing up the money for better stuff, it can feel hard to justify – especially when costs are rising faster than ever.

It’s easy to buy cheap.

Not only is it less painful on the wallet but going for the cheapest option saves us from spending any time on researching better service offerings with added value benefits.

When deciding which freight forwarder is best for your business, consider the benefits and drawbacks of each type of logistics partner, as well as how they will affect your operations. It’s critical to consider your company’s priorities and locate a match that would provide the most benefit in those areas, we have developed this guide to help you decide how to choose the best forwarder.

We would advise caution if you were considering using a cheap freight forwarder. Sometimes a service is inexpensive for a reason, is it the level of customer service? Is it the shipping route? It’s up to you to dig a little to figure out if that reason could negatively affect you.

Possible questions to ask might include:

  • How far will my shipment be taken in the delivery process (destination port vs factory gate)?
  • What services are not included those other forwarders would?
  • What does the online sentiment look like? Is the firm reputable? And have people shared their own experiences with them online, if so what do they look like?

 

How Much Does a Freight Forwarder Cost

 

In most circumstances, you and your chosen forwarder agree on a quote for the complete end-to-end process of getting your shipment from its origin to your store or warehouse. This translates into the costs are made up of around 20 individual factors.

It’s critical to acquire an itemised quote from your freight forwarder so you know what’s covered and what isn’t. A freight forwarder’s primary responsibility is to coordinate and manage the transportation arrangements for your shipment. Many, on the other hand, will handle all customs clearance formalities. It’s critical to understand what services your chosen provider can give. After that, you can fairly compare quotes before signing a contract with your preferred supplier.

 

Cargo Type


When it comes to understanding costs, the easiest ones are those that are associated to the type of cargo (goods) you are shipping.

After all, you very likely have a pretty good idea about the product that you’re importing.

Generally, FMCG, perishable or hazardous items all require specialised containers or careful handling, which often takes more time while also being heavier.

Our advice would be knowing your cargo type and any special requirements to avoid any surprises down the road.

 

Container Costs

 

Very likely the single biggest cost you’ll incur as a business looking to move goods internationally from one country to another.

Generally speaking, containers come in two sizes:

  • 20-foot equivalent (TEU – Twenty Foot Equivalent Unit)
  • 40-foot equivalent (FEU – Forty Foot Equivalent Unit)

Where your shipment gets placed depends on its size.

Read our blog on TEU and FEU containers.

But what happens if you don’t require the full capacity of the container?

Most shipments do not necessitate a full container load (FCL), they are bundled with other shipments into a single unit, and you are only charged for the space your items occupy. This is referred to as a less-than-container load (LCL).

 

Transportation & Shipping Costs

 

Also known as ‘carrier costs’, these are the principal cost for any shipment, no matter what goods are being shipped! These include managing your inventory from the manufacturer to your warehouse and ultimately to your customers.

The carrier cost is the expense associated with sending your shipment by land, sea, or air and moving it to its destination port (or location).

There are two factors that influence this cost:

  • Origin and destination: The further the distance between the cargo and its destination, the higher the rate.
  • Mode of transportation: The freight shipping method you choose will play a major role in how much you’ll spend on your transportation costs. For example, shipping via ocean freight will be much cheaper than airfreight.

It’s worth noting, the distance travelled is probably the single biggest influencing factor in your transportation and shipping costs. It stands to reason that sending something further away is more costly than sending it to a closer location. However, routes that are more frequently travelled (China to UK) by shipping companies tend to be less expensive than less common routes. In those cases, sending goods further can prove cheaper.

 

Documentation fees


When importing or exporting different types of freight there are several key documents that you will need to acquire to be able to securely ship your goods.

These include:

  • Your personalised shipping quote
  • Commercial Invoice
  • Certificate of origin
  • Marine Insurance Certificate
  • Booking Confirmation
  • Packing List
  • Letter of Credit
  • SLI (Shipper’s Letter of Instruction)
  • Bills of Lading: you will always need one Bill of Lading, but you may need more multiple if you are using intermodal transportation

There may also be other documents that you will need that are dependent on the type of goods you ship from hazardous goods form to cargo receipts.

 

Freight insurance


Freight of any type is fraught with things that can go wrong, and from time to time, things do.

There are several different types of freight-related insurance policies which all cover different aspects, these include:

  1. Cargo insurance cover
  2. Legal cargo insurance cover
  3. Cardboard cover
  4. Route cover
  5. Marine insurance

 

Administrative charges

 

These are fees most freight forwarders apply to the quoted priced for the associated processing of paperwork, copying documents, and preparing the air waybill/ocean bill of lading (or other bill of lading). These documents are often essential for the shipper, the carrier, and the consignee. As well as containing vital information about the shipment, these documents often represent evidence of the contract between the shipper and the carrier. They also help the freight forwarders cover the cost of processing and handling shipments.