Key components of freight shipping costs

Looking to send a container across the globe or a package across the country — but unsure about budgets? Understanding the intricacies of shipping costs can seem like a financial black box. In this article, we decode 11 essential components that make up freight costs, helping you navigate the complex maze of logistics fees and budget a winning shipping strategy.

Essential transportation costs

These costs are fundamental expenses, comprising direct charges associated with shipping.

1. Mode of transportation (air, sea, or land)

   The speed and budget implications of your chosen transportation mode are crucial. Air freight wins on time but burns more fuel, while sea freight is a cost-effective alternative but is slower and more suited for large-volume shipments. Land freight (road and rail) offers flexible options, each with its own price-performance sweet spot. Choose the best option as per your needs.

2. Type of freight (spot or contract)

   Contract shipping offers predictable costs with long-term agreements — ideal for regular freight transporting and shielding you from fluctuating factors and market volatility. However, if your requirements are sporadic or flexible, spot shipping can offer agility and cost savings. Weigh your options and choose the option that aligns with your volume and predictability.

3. Tariffs and fuel surcharges

   Global trade comes with numerous taxes and surcharges, adding layers to your cost. Before shipping, understand international trade policies and potential duties based on your destination and goods to avoid surprises. Consider volatile prices and other factors in your budget and opt for fuel-efficient shipping or eco-delivery models when possible.

4. Freight weight and distance

   The greater the distance and weight of your shipment, the more resources it demands — including increased fuel consumption, extended transit times, and the complexity of managing logistics networks. Consider whether you need to ship a full container load or less-than-container load.

Additional fees and charges

These expenses are for supplementary but vital factors beyond the basic freight shipping costs.

5. Terminal handling charges (THC)

   Freight handling within ports and terminals incurs added fees for services like loading/unloading goods, storage, and processing. Understanding THC components and negotiating efficient freight movement times with your provider can potentially reduce these charges. Note that THC depends and varies as per specific terminal/port.

6. Customs clearance fee

   International shipping involves regular interactions with customs officials. Duty fees, clearance inspections, and documentation costs can vary depending on your route and the HS code of your goods. Diligent preparation of customs documentation, understanding applicable rates, and staying informed about trade regulations can help prevent unexpected costs as well as delays.

7. Demurrage and detention charges

   Delays can be costly. Demurrage charges kick in if your container overstays inside the port, while detention fees arise for container overstays outside the port. To avoid costly demurrage and detention charges, have realistic transit time expectations, proactive communication with your logistics provider, and contingency planning for emergencies.

8. Accessorial charges

   Special handling, security measures, and insurance add value to your shipment’s journey but also come with a price tag. These costs provide optional services beyond standard shipping for specialised, tailored demands. So, evaluate your specific needs based on your cargo value and risk profile. Prioritise necessary add-ons to avoid inflating your budget unnecessarily.

Other shipping costs considerations

These are less apparent or indirect costs associated with the transportation process.

9. Impact of packaging and palletisation

   Bulky packaging wastes container space and translates to higher charges. Most carriers give a freight quote based on dimensional weight or volumetric weight (factoring the space a package occupies rather than its actual weight). So, optimise your packaging, utilise standard pallet sizes when needed, and maximise container capacity to keep your cost of freight shipping low.

10. Potential costs for delays and extended storage

    Delays in shipping due to customs issues, weather disruptions, or any inevitable circumstances can incur additional inventory holding costs and disrupt your supply chain. Have ‘just-in-case’ budgets and build buffer periods into your schedule to minimise the financial impact of unforeseen hiccups.

11. Peak season surcharges

    Holidays and high-demand periods, like Black Friday and Chinese New Year, often trigger peak season surcharges due to increased freight volumes. It needs extra resources, including more workforce, equipment, and operational hours, to handle the increased workload. So, plan your shipments strategically around the peak logistics periods.

Ocean shipping with Maersk

Transporting goods doesn’t need to be a financial mystery. By understanding these crucial components of shipping freight costs, you can optimise your budgets, navigate the world of logistics with confidence, and ensure your goods reach their destination efficiently and affordably.

Maersk Go is for small and medium businesses looking for simple and reliable global transportation solutions. Every time you search for a shipment on the Maersk Go platform, you get instant daily rates and can make bookings in just a few clicks. Learn more about Maersk Go’s transparent prices.