Freight cost is rarely just one rate. A shipment may include the main transport charge plus origin handling, terminal charges, documentation, fuel or security surcharges, destination handling, customs-related fees and final delivery. Understanding the individual components is essential when comparing carrier quotations or calculating landed cost.
Freight Charges at a Glance
| Cost Area | Typical Examples |
|---|---|
| Main carriage | Ocean freight, air freight, line-haul road freight, rail freight |
| Origin charges | Pickup, terminal handling, documentation, export handling, screening |
| Transport surcharges | Fuel/bunker, security, peak season, congestion, equipment or risk surcharges |
| Destination charges | Terminal handling, documentation, deconsolidation, delivery-order or local-service charges |
| Final delivery | Port/airport-to-door trucking, unloading or special delivery services |
| Delay-related charges | Demurrage, detention, storage, waiting or truck detention |
Carrier terminology and charge codes vary. For example, Maersk quotations can separately show Ocean Freight (OF), Origin Terminal Handling (OHC), Destination Terminal Handling (DHC), documentation fees, bunker/fuel surcharges and other applicable charges. The exact inclusions must therefore be checked quotation by quotation.
Ocean Freight: FCL vs LCL
FCL (Full Container Load) pricing is generally based on the container/equipment and trade lane, with local and other surcharges added according to the carrier’s tariff or quotation.
LCL (Less than Container Load) consolidates multiple shippers’ cargo. Charges may be based on weight or volume, often with separate origin/destination consolidation and handling fees. A low headline ocean rate can therefore become expensive after local charges are added.
Air Freight and Chargeable Weight
Air freight is commonly rated using chargeable weight, which generally compares actual gross weight with a volumetric/dimensional weight. The higher applicable figure is used for the freight calculation.
The volumetric conversion factor is not universal across every carrier, service and trade. Always use the divisor or conversion rule stated in the airline, forwarder or courier tariff rather than hard-coding a single factor into a company calculator.
Example: a lightweight but very bulky shipment may occupy enough aircraft space that its volumetric weight is higher than its actual weight. In that case the freight is calculated from the higher chargeable weight, even though the scale weight is lower.
Road Freight
Road pricing can use several structures depending on the market and service:
- full truckload / dedicated vehicle rate;
- less-than-truckload or pallet rate;
- weight or volume-based rate;
- distance / zone rate;
- vehicle type and capacity;
- fuel surcharge;
- border, toll, waiting or special-permit charges; and
- temperature-controlled or dangerous-goods premium.
Common Ocean Freight Surcharges
- Terminal handling: handling of the container/cargo at origin or destination terminal.
- Documentation: processing transport documentation or local carrier documents.
- Bunker / fuel adjustment: recovery of fuel-related cost.
- Peak season surcharge: additional charge during periods of high demand.
- Congestion surcharge: cost associated with congestion at specified ports or destinations.
- Equipment / special cargo surcharge: reefer, out-of-gauge, dangerous-goods or special-equipment services.
Surcharges change over time and by trade lane, so the operational rule is to compare the full quotation valid for the shipment date, not a historical surcharge list.
Prepaid vs Collect
Freight prepaid generally means the freight charge is paid at origin by the party responsible for settling it with the carrier. Freight collect generally means the freight is collected at destination.
This is a carrier billing instruction. It should not be confused with the contractual delivery/risk rules under Incoterms®. A carrier can be instructed to bill one party while the sale contract separately defines who ultimately bears the cost.
Do Not Confuse “FOB Origin/Destination” with Incoterms® FOB
Some domestic transport and accounting systems use phrases such as “FOB origin” or “FOB destination” as shipping/billing terminology. ICC Incoterms® FOB is different: it is a specific sea/inland-waterway trade rule under which delivery occurs when goods are on board the vessel at the named port of shipment.
For international contracts, use the exact ICC rule and named place/port, for example FCA [named place] – Incoterms® 2020 or FOB [named port] – Incoterms® 2020. See Incoterms 2020 Explained.
Worked Freight Comparison
Assume two forwarders quote the same ocean shipment:
| Charge | Forwarder A | Forwarder B |
|---|---|---|
| Ocean freight | BHD 420 | BHD 500 |
| Origin charges | 150 | 80 |
| Destination charges | 190 | 110 |
| Documentation / other | 60 | 45 |
| Total quoted logistics cost | BHD 820 | BHD 735 |
Forwarder A has the lower headline ocean freight rate but the higher total. Freight procurement should therefore compare quotations on a like-for-like all-in basis.
Freight Cost vs Landed Cost
Freight is one part of landed cost. A full import-cost comparison may also include:
- purchase price;
- insurance;
- customs duty and import taxes;
- customs brokerage;
- inspection or permit charges;
- port/airport storage;
- demurrage and detention risk;
- final delivery; and
- inventory/working-capital impact from transit time.
For supplier decisions, see SCMANA’s Total Cost of Ownership guide.
Freight Quotation Checklist
- Origin and destination are identical across quotations.
- Service mode and route/transit time are comparable.
- Equipment type, weight and dimensions are correct.
- All origin charges are identified.
- Main freight is identified.
- Fuel/security/seasonal surcharges are identified.
- All destination charges are identified.
- Customs clearance and final delivery inclusions are clear.
- Free time and delay-related charges are understood.
- Quote validity and currency are checked.
- Incoterm and freight payer are not being confused.
Useful Freight KPIs
- Freight cost per kg / tonne / pallet / container / shipment
- Freight cost as a percentage of sales or landed cost
- On-time pickup and delivery
- Transit-time variance
- Cost per trade lane
- Accessorial / surcharge percentage
- Claims and damage rate
- Demurrage, detention and storage cost
- Premium / emergency freight spend
Interview Question: How Do You Compare Freight Quotes?
A strong answer is: I normalize the quotations to the same origin, destination, mode, equipment, weight and service level, then compare the full cost including origin, main carriage, surcharges, destination and delivery charges. I also compare transit time, free time and reliability rather than selecting the lowest headline freight rate.
Related SCMANA Guides
Reference
Maersk carrier tariff notices illustrate separate charge components including ocean freight, origin/destination terminal handling, documentation and applicable surcharges. See Documentation Fee – Origin / Destination.
Download the Practical Workbook
Use the SCMANA Freight Cost Calculator to build freight cost from base charges and surcharges and compare shipment-cost scenarios.
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