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Freight
Definition
All merchandise, goods, products or commodities shipped by air, rail, road or water, other than baggage, express mail or regular mail.
Freight is also a term used to classify the transportation of cargo and is typically a commercial process. Items are usually organised into various shipment categories before they are transported.
Transportation has a strategic role in any selling company, because it is a part of a company’s strategic positioning, it is a marketing asset to “outrun” the competitor. The requirements of export logistics differ from domestic operations, the best shipment option equates to the one with the lowest possible cost while also ensuring that the goods will reach their final destination in the best possible conditions.
Classifying freight
Transported goods are split into two categories:
- FCL (full container load) contains one supplier’s product; goes directly to the customer’s premises
- LCL (less than full container load) contains several supplier’s products; these have to be grouped together for despatch and then separated in the receiving country’s depot
The various stages which the goods will have to go through from their arrival at the port of departure to their transfer onto the shipment vessel are the following:
| Stage of Export | Time Frame |
| Reception | from the point at which the goods arrive at port on the truck till they are introduced in the storage |
| Storage | he time taken in the port waiting for the vessel |
| Transfer | from the arrival of the vessel till the goods are loaded alongside the vessel |
| Loading process | from the time with which the goods are placed alongside the vessel till they are stored onboard |
| Handling process | includes all manipulation of the goods onboard the vessels until it reaches its transportation point |
N.B: When containers are used these steps are grouped into one under the THC or Terminal Charge.
Typical exporting problems
Four typical problems occurring when exporting are:
- breakage
- weight
- moisture
- pilferage
Breakage and weight
Causes of breakage are numerous during the movement of goods this can be the result of:
- through handling, use of slings, nets conveyors or chutes to load goods onto a vessel
- the weight of other cargo placed on top of goods
- careless unloading
Moisture and pilferage
- moisture is a constant problem due to condensation in the vessel
- unloading may take place in the rain
- theft and pilferage are common at the point of arrival (especially in developing countries)
The only remedy to these problems is adding extra costly packaging to protect your goods, or using container shipments. Check with carrier companies for advice on proper packaging. Remember that air freight usually requires less packaging than ocean freight and can therefore be the cheaper option since freight is assessed and priced on the gross weight of goods.
Marking and packaging of equipment
The destination should be marked clearly on the packaged goods and it can be useful to also provide handling instructions in the destination language, yet no further information on the contents of the package should be revealed to reduce the risk of theft. (See Logistics Safety)
More information can be found by visiting A-Z Worldwide Airfreight Directory and the British International Freight Association
Delivering the goods
INCOTERMS
An important consideration at quotation stage is the use of a delivery term (Incoterm) which can affect your costs significantly. Before exporting your freight it is essential to assess the various INCOTERMS to establish the type of contract you will need, sharing out the cost of all stages of the export procedure with your buyer/ seller.
Definition
A codification of international rules for the uniform interpretation of common contract clauses in export/ import transactions. Developed and issued by the International Chamber of Commerce (ICC) in Paris. The version which is currently valid is publication no. 460 from 1990. The 13 Incoterms are:
- Ex works (EXW)
- Free Carrier (FCA)
- Free Alongside Ship (FAS)
- Free on Board (FOB)
- Cost and Freight (CFR)
- Cost, Insurance and Freight (CIF)
- Carriage Paid To (CPT)
- Carriage and Insurance Paid To (CIP)
- Delivered at Frontier (DAF)
- Delivered Ex-Ship (DES)
- Delivered Ex-Quay (DEQ)
- Delivered Duty Unpaid (DDU)
- Delivered Duty Paid (DDP)
In most Incoterms, the transference of risk from the exporter to the importer occurs when the responsibility for the costs ends for the exporter and begins for the importer, although there are exceptions to the rule.
For a full book describing the responsibilities of the buyer and seller in each term refer to International Chamber of Commerce (ICC), Paris, France.
An analysis of the Incoterms will reveal that many are very similar regarding the sharing of costs between exporter and importer, therefore in order to decide on the one to adopt, it is useful to:
- take into account the mode of transport utilised for the shipment of goods (see shipment) and then use the most appropriate Incoterm relating to that particular mode
- or alternatively use the one with the most polyvalent character which can be applied to all modes of transport (for instance if you are using inter-modal shipment methods)
Calculating freight cost
Freight is the agreed amount payable to the carrier for carrying cargo and delivering it to its destination.
- It is calculated either on the basis of weight, number of packages or volume.
The parties normally agree on when freight is earned or payable, either on loading, sailing of ship or on signing the bill of lading (see documentation). On the absence of an agreement freight is payable on delivery of the goods at their final destination.
- This means that if cargo fails to reach the destination through no fault of the carrier, freight is not payable.
- This also applies if the cargo arrives in an unsatisfactory state, is lost or delayed to an unsatisfactory date.
