Q: What are the usual methods of freight payment ?
A: Most freight payments are done with a Company check or wire transfer (subject to administrative fee). Payments needs to be made on terms agreed.
Q: What is a freight forwarder?
A: Freight forwarding is a service used by companies that deal in international or multi-national import and export. While the freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services. Sending products from one international destination to another can involve a multitude of carriers, requirements and legalities. A freight forwarding service handles the considerable logistics of this task for the client, relieving what would otherwise be a formidable burden.
Freight forwarding services guarantee that products will get to the proper destination by an agreed upon date, and in good condition. The freight forwarding service utilizes established relationships with carriers of all kinds, from air freighters and trucking companies, to rail freighters and ocean liners. Freight forwarding services negotiate the best possible price to move the product along the most economical route by working out various bids and choosing the one that best balances speed, cost and reliability.
A freight forwarding service generally provides one or more estimates to the client along with advisement, when necessary. Considerations that effect price will range from origin and destination to special requirements, such as refrigeration or, for example, transport of potentially hazardous materials. Assuming the client accepts the forwarder’s bid, the freight is readied for shipping. The freight forwarding service then undertakes the responsibility of arranging the transport from point of origin to destination.
One of the many advantages of using freight forwarding is that it handles ancillary services that are a part of the international shipping business. Insurance and customs documentation and clearance are some examples. As a consolidator, a freight forwarding service might also provide Non-Vessel Operating Common Carrier (NVOCC) documentation, or bills of lading. Warehousing, risk assessment and management, and methods of international payment are also commonly provided to the client by the freight forwarding service.
A good freight forwarding service can save the client untold time and potential headaches while providing reliable transportation of products at competitive rates. A freight forwarding service is an asset to almost any company dealing in international transportation of goods, and is especially helpful when in-house resources are not versed in international shipping procedures.
Q: Why are the shipping rates so volatile?
A: While there are several factors involved, the primary is market demand. Traditionally from Dec through April for imports, especially from Asia to the U.S., it is called the “slow season.” Because the retail market slows down after Christmas. However from mid January through early February there is an upsurge of cargo moving to beat the Chinese New Year deadline whereby factories all over China shut down for weeks. This usually keeps rates high as there is always space problems for cargo getting on vessels. From May through November this would be the “peak season” where there is a big demand for cargo moving into the U.S., so the Carriers raise the rates during this period, with the GRI (general rate increase), and PSS (peak season surcharge).
Another factor is fuel, or what is called the Bunker Fuel factor. This is a floating surcharge that the Carrier’s can change when oil prices rise or fall. It is called the BAF.
Another factor is when the Carrier has increases in costs such as when Terminal costs rise, especially with Unions, congestion problems, etc. Or when the U.S Rail costs increase for similar reasons. This is where the Carriers can add in new surcharges which have happened in the past and eventually get absorbed into the “all in ” rate quoted.
Most recently the primary reason for rate increases, was a knee jerk response to the tremendous downturn in traffic and volume as a result of the current U.S. recession since ’08. This downturn caused many carriers to lose about 50% of their previous volume and while their costs remained the same or higher, and their revenue all but disappeared, they found themselves the beginning of this year looking at an average of $500, 000,000 in losses per Carrier. So from late ’09 until May of ’10, most Carriers put a large portion of their fleet out of commission off the coast of Singapore. Thereby creating a vessel shortage, or a false space problem. This gave them all excuse to raise their rates again, in order to salvage their businesses. This type of thing is not normal.