How are Air Freight Charges Calculated?

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The process of calculating air freight charges is a relatively simple ordeal, where it only requires two variables: The chargeable weight and the applicable rate per chargeable weight. The major work, however, is to derive both the chargeable weight and the applicable rate. In this article, you should be able to understand the TACT tariffs and the process behind determining both the chargeable weight and applicable rates in order to calculate the applicable air freight charges.

Also, we will introduce what is the difference between international rate and domestic rates in air freight, as well as other subsidiary charges that are normal to expect in an air freight shipment.

In this article, we will also include a common example of air freight calculation to help you better understand the air freight calculation method. This should be a sufficient primer to help exporters, importers and freight forwarders understand air freight calculation.

Let’s get into it!

air freight calculation

The Two Major Variable

 The total air freight charge is calculated as: –

Chargeable weight x Applicable rate = Total Freight Rate

Usually, the unit weight measurement is in kilograms or tons and the applicable rate is measured in US Dollars.

The metric system is used to measure weight as most countries understand the metric system, whereas the USD is the most traded currency, therefore the most stable among other currencies.

Applicable Rate

Rates are provided by airline companies on a per pound, or per kilogram basis.

As we mentioned, it is usually quoted in national/local currency. However, certain airline routes are charged in USD instead of local currency. This is mainly because the USD is a relatively safer currency and is less volatile than other currencies.

As an example, Indonesia provides air freight rates in USD for domestic flights, possibly because the IDR Rupiah has a very low-value denomination relative to USD; 1 USD is equivalent to 14,645 Rupiah.  

Where to get Air Freight Charges?

With over 5000 airlines with an ICAO number, air freight rates are abundant for cargo-owners and freight forwarders to choose from.

There are generally two ways a cargo owner can request for an air freight rate.

  1.  Inquire with the airliner company directly for rates specific to your needs
  2. Inquire from a freight forwarder that has a list of rates readily available.

Benefits of direct contract with airliners

If a cargo owner opts to request for a quotation directly from an airliner, the cargo owner will consequentially have a direct contract of carriage with the airline company.

This way the cargo owner gets to have a direct relationship with the airline company. If the cargo owner has the regular shipment and has a strong relationship with one particular airline company, the cargo owner may be at the position to negotiate for a lower freight rate.

Benefits of getting freight rates from freight forwarders

On the other hand, a cargo owner can choose to outsource the transportation headache to freight forwarders. This allows them to focus on their core business and not worry about the minutia of freight transport arrangement.

The bigger benefit, in our opinion, is that freight forwarders that are adept in air freight transportation are mostly registered as IATA TACT agents. Which means, they are provided with a list of airline services and a plethora of air freight charges, and transit time choices.

Airliners that participate in the IATA TACT program are also able to list their services for over 70,000 freight agents, raising their exposure to the freight industry. This form of community allows for a more streamlined, efficient freight quotation.

Features of the Air Freight Rates

In general terms, here are some features of a quoted air freight rate: –

  1. Airfreight is quoted on a per weight basis (per kg, per lbs)
  2. Airfreight rates for a shipment quoted have a validity period/expiry.
  3. Rates applied for a route between Port of Loading and Port of Discharge
  4. Any routing and transit time difference is reflected in the air freight rate

Breakdown of Applicable Rate

Determining the applicable rate is a process of elimination of 3 other rate categories.

  1. Specific Commodity Rate
  2. Class Rate
  3. General Cargo Rate

The Specific Commodity rate takes precedence over Class rates and General Rate, and the Class Rate takes precedence over the General Cargo Rate.

Specific Commodity Rate

As the name suggests, the airliners reserve a separate rate that is specific to a list of cargo commodities.

Specific commodity rates are usually lower than general cargo rates and are published for a particular commodity from a specific point of origin to a specific point of destination.

To recap, specific commodity rates are: –

  1. A lower rate compared to general cargo rate
  2. Applicable for a specific type of cargo
  3. Applicable for a specific volume of cargo
  4. Applicable for a specific POL and POD

Resource: https://www.hawaiianaircargo.com/ship/ratesandestimates/specific-commodity-rates

Class Rate

Class rates are applied for specifically designated class of goods.

There can be some confusion between a Specific Commodity Rate and a Class rate, where both apply to a specifically designated good within certain IATA Conference area.

Class Rate has characteristics of: –

  1. Either higher or lower than General Cargo Rate (GCR rate)
  2. Expressed as a percentage of GCR Rate
  3. Takes priority over General Cargo Rate

Some examples of applicable cargos for CCR rates are: –

  1. Live animal
  2. Precious Cargo
  3. Printed Matters such as Newspapers
  4. Baggage shipped as cargo
  5. Human Remains

General Cargo Rate

If the cargo does not fall under the category of Class Rate and Specific Commodity Rate, then it falls under the General Cargo Rate.

Minimum Chargeable Rate

If the final calculated air freight rate is lesser than the Minimum Chargeable Rate, the airliners will charge the minimal chargeable rate.


Chargeable Weight

Now moving on to the calculation of Chargeable weight, it is the actual gross weight or volume weight.

One point to note that the gross weight is used for calculating chargeable weight instead of the net weight. Gross weight takes into account the weight of the packaging and pallets as well.

Determining the gross weight is relatively straight forward, the volumetric weight is determined by the following formula

Length(l) x Width(w) x Height(h) = Volumetric weight (kg)

Determining the Break Back Point

Weight (kg)Rate (USD)
M120.00
N6.70
455.05
1003.35
2502.35
5002.10
10001.85

A typical weight rate published will look something like the above. Notice that there is a big margin difference between one weight rate and another weight rate. 250kg has a rate of USD 2.35 per kg whereas 500kg has USD 2.10 per kg. What happens if the cargo weight is between 250 and 500 kgs? This is where we have to determine the break back point.

(Higher weight x Lower Rate) / Higher Rate

The break back point is to determine in which rate category you should apply as the freight rate.

For Example: –

To determine the break back point between 250kg and 500kg, we will follow the above formula.

Higher weight = 500kg
Lower Rate = USD 2.10
Higher Rate = USD 2.35

(500kg x USD 2.10)/USD 2.35 = 446.809kg or 447.00kg (to the nearest half kg)

Therefore, if your cargo is below 447kg, you should use the lower rate: USD 2.10/kg

If your cargo is above 447kg, you should use the higher rate: USD 2.35/kg


Example Air Freight Charge Calculation

Let’s solidify our understanding of determining chargeable weight and applicable rate with the following examples.

Routing: Sydney (SYD) to Hong Kong (HKG)
Commodity: Live eel
Gross Weight: 260kgs

Cargo Dimension: 10m (Length) x 1m (Width) x 2m (Height)

Step 1: Determine Chargeable Weight

Gross Weight = 260kgs

Volumetric Weight = 1m x 1m x 2m = 2m3

Gross weight is higher than the volumetric weight (2m3 = 200kgs) approximately.

Chargeable weight = 260kgs

Step 2: Refer to TACT Rate

When referring to the TACT Rate, we will use the description of goods that most accurately describes the transported cargo. One should refer to the TACT description guideline religiously.

SCR/ULD NumberCargo Description
0314Abalone
0315Crabs, Crawfish, Lobster
0320EEL
0324Fish (Edible/Excluding Lobster, Scallop)

Step 3: Determine Applicable Rate (Use the Break Back Method)

SCR/ULD NumberWeight (kg)Rate (USD)
03202502.35
03205002.10

In Step 3, we will apply the corresponding SCR rate at the appropriate Chargeable weight for the shipment

Recall: Chargeable Weight = 260kg

Break Back Method = (500kg x USD2.10) / USD2.35 = 447 kg (Break back point)

Since the chargeable weight do not exceed the break back point, we will refer to the rate corresponding to the weight of 250kgs

Step 4: Determine Air Freight Rate

Chargeable Weight = 260kgs
Applicable Rate (SCR Rate) = USD2.35/kg

Weight Charge = 260 kgs x USD 2.35/kg = USD 611.00


Conclusion

We hope this general guide will be able to help you to determine how the air freight rate is derived, for the cargo owners, this can be referred to as a general guide to cross-check the accuracy of the chargeable weight and applicable weight.

For the freight forwarders, this serves as a primer to understand how an air freight rate is derived.

Additional Resource: Complete Guide to Air Freight Procedure

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