A Complete Guide To Different Types Of Freight Charges

By Indeed Editorial Team

Published 25 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Freight charges are costs that a sender or receiver pays for transporting goods from a source location to another destination. Freight charges have multiple components, including the cost of transport, fuel charges, local taxes, special charges, handling charges and emergency costs. If you are a student of business, economics or accounting, or if you work in logistics and supply chain management, understanding the nuances of freight charges can benefit you. In this article, we examine what freight charges are and list the most common types of freight charges with their definitions.

What are the different types of freight charges?

The types of freight charges depend on the mode of transportation like air, sea or road. While some charges are common for every mode of transportation, some are exclusive to a particular mode. Companies may levy freight charges at the time of booking, during transit, before delivery or at the time of delivery. Some charges may universally apply to all countries, while some may be exclusive to a few countries.

Freight companies include the breakup of freight charges in an airway bill for air freight, bill of lading (BOL) for ocean freight and roadway bill for truck freight. While only a few charges apply to road freight, multiple types of freight charges make up the cost of an ocean or air freight. The nature and magnitude of charges that a logistics company may levy differs for ocean, air and truck freight.

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Types of ocean freight charges

Ocean freight charges fall into three main categories, namely freight, free on board (FOB) and the delivery duty unpaid (DDU) categories. The freight category covers charges of the whole process of shipping. FOB charges include transportation, loading and unloading costs at origin and destination ports and insurance components. The DDU category indicates whether the buyer or the seller takes responsibility for paying customs duties and taxes at the destination. The different types of ocean freight charge are:

Freight category charges

These are some common components of freight category charges:

  • Ocean freight (OCE): This is the base cost of shipping one container from one point to another.

  • Bunker adjustment factor (BAF): BAF is a surcharge that compensates for fuel price fluctuation.

  • Currency adjustment factor: It is a surcharge if you pay for the cargo in foreign currency and it is usually a percentage of basic ocean freight.

  • Interim fuel participation (IFP): Shipping companies apply this charge if there is an increase in fuel prices.

  • Origin fuel surcharge (OFUE): Source countries apply this charge for oil prices and it is usually a percentage of basic freight.

  • Origin terminal handling charges (OTHC): It is a charge at the port of origin or terminal for handling containers before loading them into a vessel.

  • Congestion surcharge (CON): There may be delays of incoming and outgoing vessels in some ports. This cost compensates for the congestion and the shipping companies apply this freight charge.

  • Emergency risk surcharge (ERS): A shipping company applies this for handling cargo in routes with the risk of violence or piracy. ERS includes bunker cost, insurance and costs for enforcing additional security measures.

  • Heavy lift (HEA): This is an additional surcharge if the cargo weighs more than the standard weight limits.

  • Out of gauge surcharge (OOG): If a container is 20 feet or more and exceeds the weight of 14,000 kg tare, shipping companies apply this charge. It compensates for the lost slots as these containers could take up additional space, causing a loss of revenue.

  • Peak season surcharge (PSS): A fee applied to all shipments during high-volume trade periods.

  • Special equipment surcharge (SPE): A seller or a consignor pays this charge if they require special temperature-controlled containers to transport their consignment.

  • Hazardous surcharge (HAZ): It is a surcharge for transporting hazardous goods like chemicals or flammable material.

  • Suez canal surcharge (SUE): SUE is a surcharge for cargo that transits through Suez Canal

  • Low sulphur charge (LSC): This is a surcharge for ships that operate in the European Union areas.

  • Panama canal surcharge (PCC): This is a surcharge for ships transporting cargo through the Panama Canal.

  • Aden gulf surcharge (ADE): It is a surcharge that shipping companies apply if they cross the Gulf of Yemen as there is a high risk of piracy and the charge compensates for potential costs.

FOB category charges

These are some common components of FOB category charges:

  • Collection fee (COL): This is the cost of collecting and delivering goods from the source location to the destination.

  • Customs entry (CUS): Every country imposes customs when foreign products come into the country.

  • Shipping line bill of lading (BIL): BIL is a document that shows the cargo details and is a transport agreement and title of ownership between the sender and the shipping company.

  • Cargo data declaration (CDD): The European Union applies this charge for potential security and safety threats.

  • Demurrage charges (DEM): The shipping company pays this charge if they fail to load or discharge the ship within time.

  • Load, lash and secure (LLS): It is a charge that remunerates professionals who provide the services of loading and securing cargo.

DDU category charges

These are some common components of DDU category charges:

  • Destination fuel surcharge (DFUE): A destination country applies this charge based on oil prices.

  • High cube additional (HQA): It is a charge for using a high cube container taller than a regular container.

  • Container cleaning fee (CCF): This is the cost for cleaning a container if it does not satisfy standards when a customer returns it.

  • Container fumigation fee: This charge applies before pickup, onboard a ship or in the port. It covers fumigation and defumigation charges on cargo and may include a fuel surcharge.

  • Chassis fee (CHF): It is an additional cost for using a chassis for overland transportation.

  • Wharfage (WHA): A port authority charges this fee for usage of the port's wharf.

  • On carriage (ONC): An inland movement service applies this charge after a ship unloads a container at the discharge port.

  • Telex electronic cargo release fee: This fee covers the cost of creating and sending electronic forms and messages to ports and government agencies.

  • Destination charges (DES): This charge applies to the destination port where the shipper hands the container to a buyer, consignee or agent.

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Types of air freight charges

Air freight is advantageous as it is faster, reliable and there is lesser risk of damage of goods in comparison to road or ocean freight. Air freight cost depends on the weight and volume of the shipment. The common types of air freight charges include:

  • Fuel surcharge (FSC): It is a charge that considers the regional and seasonal variations in fuel costs.

  • Security surcharge (SSC): The service provider at the origin and destination airports charges this surcharge to cover additional security measures. It is a mandatory surcharge.

  • Container service charge (CSC): Container service charge or terminal handling charges apply if the airport has to store cargo within its terminal for some time.

  • Customs clearance fees: Shippers pay these charges to the customs department to allow the entry of goods into a country.

  • Associated trucking fees: These charges are paid to a trucking company if they pick up cargo from an airport and transport it to the next stage in a cargo journey.

  • Airport screening fee: Both source and destination airports charge this fee to screen for dangerous, hazardous or banned articles in the shipment.

  • Document creation fee: This charge covers the creation of documents like bill of lading and delivery order at origin or destination airports at the time of export or import.

  • Transport document amendment fee (AMF): If a seller or a consignor wants to change the consignor details or the cargo information, the air freight company charges AMF to make the necessary changes.

  • Gateway transfer fee: If a customer wants to transfer the shipment to a third party, like an agent, broker or a new consignee, the shipping company charges this fee.

  • Messenger fee: It is a courier fee for sending documents from an airport to a broker, transportation provider or any supply chain partner.

  • Cargo insurance: Sellers or consignors pay this mandatory fee to insure the shipment from loss, damage or theft.

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Type of truck freight charges

The factors determining road freight charges are the shipping modes, type of trucks, the distance between source and destination locations, size and weight of the shipment and any special delivery requirements. The different types of truck freight charges are:

  • Truck freight rates: Freight companies fix these base freight rates based on the demand and availability of trucks. The base rate could be higher in certain popular routes and lesser in areas with fewer requirements.

  • Pick-up charges: Freight companies usually pick up the consignment from the consignor. These charges include fuel costs, loading costs and wages.

  • Handling charges: If a customer sends their consignment to the shipper, they may sort and arrange it according to route and urgency. These charges are not applicable if a customer uses a full truckload to transport their cargo.

  • Main leg charges: These are the actual transport charges and include costs for the route, fuel, tolls and any regional taxes.

  • Delivery charges: These are the charges for unloading, sorting and handling the shipment before the delivery.

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