What Is Freight? How Is It Calculated?

Those who are new to e-export may have heard or perhaps never heard of a term: Freight. In this article, you can find the answer to the question what is freight, which is the main topic of this content, and gain a better understanding of the subject to proceed more consciously in e-export. Here are all the details about what freight means and how it is calculated!

What Is a Freight Invoice?

Freight refers to the transportation fee paid to shipping companies for moving goods from one place to another. This term is generally associated with sea transportation; however, it can also be used for air, road, and railway transportation. Freight is an important cost factor in international trade and may vary depending on the type, quantity, destination, transportation time, and transportation method of the goods. Now that we have generally answered the question what is a freight invoice, we can move on to freight types. The freight types are listed below.

1. Freight in Sea Transportation: It is the most commonly used type of freight. It covers transportation carried out by ships. It may include container transportation, bulk cargo transportation, and tanker transportation.
2. Freight in Air Transportation: Air cargo transportation is preferred especially for goods requiring fast delivery or high-value products. Air transportation is generally more expensive, but delivery times are much shorter.
3. Freight in Road Transportation: It covers transportation carried out using trucks and trains. It is commonly used for short and medium distances. Road transportation is ideal for door-to-door delivery.
4. Freight in Railway Transportation: It enables large quantities of goods to be transported economically over long distances. It plays an important role especially in intercontinental transportation.

What Is a Freight Contract? How Is It Priced?

So, what is a freight contract? Freight contracts are official documents that define the details of the transportation process. These contracts include transportation terms, freight charges, payment conditions, and the responsibilities of the parties involved. The payment of the freight fee specified in the contract is considered a payment made to the carrier for fulfilling its obligations. Pricing is generally determined as follows:

A specific fixed fee is determined for the transportation process, and this is called fixed freight.
Pricing is based on variables such as the weight, volume, or value of the goods to be transported, and this is called variable freight.
If pricing is based on the duration of transportation, it is called time-based freight.

In short, freight has a critical importance in the logistics and transportation sector and must be managed carefully to ensure efficient trade operations.

How Is Freight Calculated?

We conclude our article on what freight is and how it is calculated by discussing freight calculation. The freight calculation process may vary depending on the transportation method, characteristics of the goods, distance, and other factors. Here are the factors and methods generally considered when calculating freight:

Weight and Volume of the Goods

Weight-Based Calculation: A freight fee per ton is applied. For example, if the transportation cost is 100 dollars/ton, the freight fee for a 10-ton shipment will be 1000 dollars.
Volume-Based Calculation: A freight fee per cubic meter (m³) is applied. For example, if the transportation cost is 50 dollars/m³, the freight fee for a 20 m³ shipment will be 1000 dollars.
Gross Weight or Volume: The calculation is made based on whichever value is higher.

Transportation Distance

As the transportation distance increases, the freight fee also increases. A fee is generally determined per kilometer or nautical mile.

Transportation Method

Sea Transportation: It may include different types such as container transportation, bulk cargo transportation, and tanker transportation. Each type may have different pricing criteria.
Air Transportation: It is generally more expensive and calculated based on the weight/volume ratio.
Road Transportation: A fee per kilometer is determined for truck or train transportation.
Railway Transportation: A fee is generally calculated per ton-kilometer.

Cargo Type and Value

Dangerous Goods: Transportation costs may be higher.
Valuable Goods: Insurance costs are added.
Sensitive and Fragile Products: Costs increase due to special packaging and transportation requirements.

Additional Services

Insurance: Insuring the transported goods is generally included in the freight fee.
Customs Procedures: Additional charges may apply for customs duties and procedures.
Storage: Additional costs may occur for storage, loading, and unloading operations.
Fuel Surcharge: An additional fee may be applied due to fluctuations in fuel prices.

Freight Types

FOB (Free On Board): The seller's responsibility ends when the goods are loaded onto the ship. The buyer pays for sea transportation and costs at the destination port.
CIF (Cost, Insurance, and Freight): The seller covers transportation and insurance costs of the goods. Ownership transfers to the buyer when the goods reach the destination port.
EXW (Ex Works): The seller delivers the goods at their own warehouse. The buyer assumes all transportation and insurance costs.

Freight Calculation Example

For example, when you want to transport a shipment by sea:
1. Cargo weight: 10 tons
2. Transportation distance: 5000 nautical miles
3. Freight charge per ton: 50 dollars/ton
4. Insurance cost: 100 dollars
5. Customs duty: 200 dollars

Freight fee: 10 tons X 50 dollars/ton = 500 dollars. The total cost is calculated by adding insurance and customs costs to this amount.
In addition to this information about freight among e-export terms, you can also read our article titled What Is CBT? to learn more about "Cross Border Trading", also known as "Cross-Border Commerce".