Chapter 7

Freight rates
Topics covered in this chapter

• Theory of freight rates

• Constituents of the freight rate

• Factors influencing formulation of freight rates

• Air freight rates and charges

• Air freight consolidation

• Canal and inland waterway freight rates

• International road haulage freight rates

•

• Maritime container rates

• Sea freight rates

• Calculation of freight rates

• Royal Mail International

Theory of freight rates

The cost of freight represents a significant factor in the final price of the
product to the consumer/buyer. It is a diverse area with individual
transport modes having a differing structure. Hence the need for the
exporter to comprehend the factors determining the freight rate to
conduct effective negotiations with the carrier.

Constituents of the freight rate and its formulation

An important part of the chapter and the need to focus on each

element of the tariff structure totalling 17 and the eleven factors.
Shippers should probe into their rates strategy of cost/value added
benefit. The situation will vary by country and the overall efficiency of
the transport system and cost structure.
Air freight rates and charges

The air freight rate is much higher than sea and embraces rates for
particular commodities. The IATA agent originates much of the cargo
under groupage both for regular and spasmodic shipments.

Air freight consolidation

A growth market and particularly focus on the 21 factors listed in which

the business operates under agent sponsorship.
Canal and inland waterways freight rates

The simple tariff examined is based on spasmodic consignment and

is counter balanced by a range of special rates based on cost plus
profits for containers palletised and indivisible loads.

International road haulage rates

Undoubtably the largest market is the Trans European. Many are

operated by freight forwarders. Overall it is a global market with rates
based on weight/measurement criteria.
International rail services rates

Rail traffic is a growth market especially in single commodity and

container volume cargoes. Note the 6 points raised.

Maritime container rates

Note the 3 factors listed: service cost, value added and market
environment opportunity. Comprehend the NVOCC consolidator rates
strategy case study.

Sea freight rates

Comprehend the range of rates especially the difference between liner

and tramp.
Calculation of freight rates

Most important to comprehend the range of freight rates calculation

and types of rates. Essential in the shippers costing rates analysis and
strategy and to understand the 24 types of rates listed.

Royal Mail International

A growth market/note the rate of 5 services offered and the benefits to

the user.
Key concepts

Ensure you understand the following:

• Theory of freight rates especially salient points.

• Constituents of the freight rate and its formulation – very important to
understand all the areas in rate negotiations.
• Air freight rates and charges – a basic understanding in rates
evaluation.
• Air freight consolidation – a growth market which must be fully
understood.
• Canal and inland waterway freight rates especially the rate structure
option.
• International road haulage freight rates in particular the structure and
the role of the freight forwarder.
• Maritime container rates in particular the case study.
• Sea freight rates especially difference between liner and tramps.
• Calculation of freight rates – important to understand the 24 types
and
their calculation.
• Royal Mail International and their increasing role.
Conclusion

Freight rates represents a complex area of types which must be

understood by the rates analyst in any costing exercise of a range
of options available for a consignment.