Analysis: Freight Rate Thaw May Be in the Works
Do you know the right questions to ask to ensure you receive an all-inclusive international freight quote? Do you know to break down the charges once you receive the proposal to make sure there are no hidden line items? Are you aware of the potential fees that might show up on your final invoice? Be in control of your international freight shipping costs by knowing how to analyze your proposal with the following breakdown.
The importance of your “Cargo Ready Date”
A cargo ready date is when a shipper/manufacturer is ready to give cargo to a transportation business or service for delivery to the buyer. Unfortunately, if cargo isn’t ready until after the agreed-upon cargo ready date (CRD), a delay in delivery will occur. And this could also mean an additional fee.
While it seems like a few days’ difference in your CRD isn’t a big deal, it is to carriers. In general, carriers issue shipping proposals that are valid for approximately two-week time periods, after which the proposal’s rates may be invalid. If your proposal includes the wrong CRD or a changed CRD, you could end up having to pay hundreds of dollars more than your original quoted price.
Common fees and potential hidden charges
Imagine opening up your final invoice for your cargo shipment and seeing a total higher than you expected. For some reason, a couple of fees have been tacked on to your order. You either get that typical sinking feeling in the pit of your stomach, or you take the alternative route and get angry.
The truth is that there are a number of fees shippers may not know about when they’re booking cargo. In the long run, these fees can add up, inherently causing higher total costs and inevitably resulting in unhappy customers. However, if you’re aware of these possible fees when you’re setting up your logistics needs, you’ll have far less of a chance of seeing surprise expenses included in your final freight shipping costs.
Customs Examination Fees
Normally, customs will conduct exams targeted at specific issues or particular shipment types (especially dangerous cargo). However, even if you aren’t doing anything wrong or your goods aren’t subject to these kinds of examinations, you could still be affected by random exams. At this point, you’d have to pay a fee, and possibly even deal with more charges incurred from delayed cargo if the examination goes longer than expected.
On the less-intensive end of the spectrum, customs may only ask to review your official shipping documents, but you also need to be prepared for the reality of more comprehensive examinations. For example, your cargo may have to be put through x-ray scanners, or even physically unloaded and inspected to make sure it meets specific requirements. Of course, you can do your best to stay out of trouble with customs, but you never know when a random exam (and resulting fee) will happen.
General Rate Increase (GRI)
A general rate increase is a surcharge which carriers add on top of their regular base rates. A GRI can occur across all or only a few trade routes during a specific time frame. Usually, carriers announce the updated costs at the beginning of the month and will adjust rates based on the current volume situation.
If you aren’t aware of a carrier’s GRI, and your cargo ready date falls within a surcharge period, you could be looking at extra costs added to your final shipment invoice. Some freight forwarders don’t inform customers of GRIs until cargo is booked, so it’s important to make sure you ask, or do your own research about surcharge periods and ensure any GRI surcharges are shown up front on your freight proposal.
Inland Delivery Charges
If you do not specifically ask to be quoted door-to-door (with the origin and destination zip codes), the forwarder might be charging you a port to port rate.
Not all cargo can be shipped directly from one port to another. Sometimes, goods need to be transported overland to a port (or vice versa) before they can be delivered to the buyer. As such, you need to pay attention to whether or not your shipping quote includes the inland delivery fees, and doesn’t just cover port-to-port transportation.
Often times, if you don’t ask (or your freight forwarder doesn’t ask you) about inland delivery, your international shipping proposal won’t include delivery across the land — that’s just how some carriers work. You’ll then be looking at adding on more expenses to your overall shipping costs.
It seems like common sense, but not all buyers factor the expense of duty rates into their overall shipping costs. Don’t make the same mistake; do your homework and talk to your freight forwarder or carrier about duties you can expect to pay for your goods. It’s best to plan for higher fees and end up keeping some of your budgeted money once you pay your final total.
Additionally, if your products are changed or altered in any way before they arrive at customs, they could incur different duty rates than you were originally quoted. The same is true with goods which were improperly classified (intentionally or not). In this case, you could end up paying thousands of dollars to sort out the seemingly minor problem with customs. Essentially, customs has the right to charge you as much as the domestic value of your goods (in fraud situations) and up to two to four times the amount of duty you actually owe (in negligence situations).
Demurrage is a fee applied to cargo which stays too long at a destination port. In general, you won’t have to worry about incurring demurrage if you’re aware of how much time you’re allowed to keep your cargo at port (usually 4-7 days), both in import and export situations. A problem arises, however, when you don’t educate yourself about your free time at port, or assume that time is the same length at all ports where your cargo arrives.
Be sure that cargo insurance is included as a separate line item. Most times if cargo insurance is not included on a transportation proposal, it is not included in the quotation. When reviewing international freight shipping proposals, also be sure to verify that the insurance covers freight from origin door to destination door. Often times, insurance offered by the forwarder only covers the goods from port to port, making all drayage (trucking) claims ineligible. Often times, damage and pilferage happen between the origin door and origin port or destination port and destination door. In our opinion, this is when the cargo is most susceptible to claims.
Courier & Documentation Fees
When looking at your freight quote, see if any courier or documentation fees are included or offered as a separate line item. Many freight forwarders will add this fee onto the invoice, despite it never being included as a line item in your original transportation proposal.
Paying unexpected fees is not a fun surprise to deal with. But a little education and preparation can go a long way towards avoiding undue fees placed on your cargo. If you do your best to plan for all possible expenses and scenarios, you won’t have to worry about owing more money in the long run on your international shipping orders.
When shipping loose cargo, it is important to provide your own pallets or risk being charged a fee to have the cargo packaged on forwarder-owned pallet. If you will not be providing your own pallets, it is imperative to know all charges up front.
When shipping a full container load (FCL) of a heavy commodity, it is necessary to verify the max load amount with your carrier of choice. Overweight cargo is subject to additional fees.
Container Management Fee
Some carriers in some select routes have begun implementing a container management fee (CMS) to cover the operational cost in managing container turn time.