Freight rates can seem opaque and arbitrary — one forwarder quotes $2,000 for a container, another quotes $2,800, and you have no idea why. But freight pricing follows specific logic, and understanding it gives you real leverage when comparing quotes and negotiating.
Ocean Freight Rate Components
- Base ocean rate — Quoted per 20ft (TEU) or 40ft (FEU) container. Set by carrier tariffs and negotiated rate agreements.
- Bunker Adjustment Factor (BAF) — Also called Fuel Adjustment Factor. Varies monthly based on bunker oil prices. Can add $200-800 per container on major trade lanes.
- Currency Adjustment Factor (CAF) — Compensates for exchange rate fluctuations. Typically 1-3% of the base rate.
- Peak Season Surcharge (PSS) — Applied during high-demand periods. Can add $400-1,200 per container.
- Origin THC (Terminal Handling Charge) — Port handling fee at origin. Set by the port/terminal, not the carrier.
- Destination THC — Port handling fee at destination.
- Documentation fee — Charged per bill of lading, typically $50-150.
LCL Rate Components
LCL is quoted per CBM or per W/M (weight-measure, whichever is higher). Key additional charges include origin CFS handling, destination CFS handling and deconsolidation fee, and the same carrier surcharges applied per CBM.
Air Freight Rate Components
Air freight is priced on chargeable weight (greater of actual weight or volumetric weight). Key rate components:
- Base rate per kg — Highly volatile, varies by origin/destination airport pair, commodity, and market conditions.
- Fuel Surcharge (FSC) — Typically 20-40% of the all-in rate.
- Security Surcharge (SSC) — Per-kg charge covering mandatory security screening.
- Airport handling fees — Charged at both origin and destination airports.
Road Freight Rate Components
- FTL (Full Truck Load) — Priced as a flat rate for the truck regardless of how much space you fill.
- LTL (Less-than-Truck Load) — Priced per pallet, per 100kg, or per loading metre (ldm).
What Drives Rate Volatility?
Freight rate volatility is driven by: global trade volume and demand for freight capacity, vessel or aircraft capacity supply, fuel prices, port congestion, seasonal demand peaks, and geopolitical events. Understanding rate components helps you compare like-for-like quotes, identify where negotiation is possible (base rates are negotiable; terminal charges are largely fixed), and validate forwarder invoices against agreed rates.
