How to Calculate International Freight Costs Correctly?



When engaging in global sourcing from China, accurately calculating freight costs is crucial for both buyers and sellers. A precise estimation of freight expenses ensures that businesses can effectively plan their budgets, negotiate competitive pricing, and optimize their supply chain operations. However, calculating international freight costs is a complex process influenced by various factors.

Here is a comprehensive guide to accurately calculate international shipping costs, with practical example to enhance your understanding.

Understand freight cost components

To calculate international freight charges correctly, it is essential to grasp the fundamental components that contribute to the overall expenses. These components typically include:

1. Transportation charges: These charges involve the actual movement of goods and are influenced by factors such as distance, mode of transport (air, sea, road, or rail), weight, volume, and container type (LCL or FCL).

2. Fuel surcharges: As fuel prices fluctuate, carriers may impose fuel surcharges to account for these changes. These surcharges are often calculated as a percentage of the transportation charges.

3. Customs fees and duties: International shipments are subject to customs fees, import duties, and taxes levied by the importing country. Import duties from China vary based on the nature of the goods, their value, and any applicable trade agreements or preferences.

4. Documentation and administration: Freight costs also include charges associated with document preparation, customs clearance, insurance, handling fees, and other administrative tasks.

Determine the freight Incoterms

The International Commercial Terms (Incoterms) define the responsibilities of buyers and sellers in international trade transactions. Selecting the appropriate Incoterm is crucial, as it impacts the division of freight costs.

Commonly used Incoterms include EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance, and Freight), and DAP (Delivered at Place). By understanding the specific Incoterm agreed upon, it becomes easier to allocate the applicable freight costs accurately.

Gather relevant information

To calculate freight costs accurately, gather all relevant information about the shipment. This includes details such as the origin and destination countries, weight, dimensions, packaging type, and any additional services required (e.g., insurance, customs brokerage). Accurate information ensures precise calculations and minimizes unexpected charges.

Research and select the appropriate carrier

Different carriers offer varying rates, transit times, and service levels. Research multiple carriers, considering their expertise in specific trade lanes, reputation, reliability, and overall cost competitiveness.

Engaging with freight forwarders or logistics providers can help identify the most suitable carrier based on the specific requirements of the shipment.


Utilize freight rate calculators and online tools

Numerous online tools and freight rate calculators are available to assist in estimating international freight costs. These tools consider various factors, including shipment details, origin and destination, and Incoterm, to provide approximate cost indications.

While these tools may not account for all potential charges, they serve as valuable references for initial estimations.

Request and analyze quotes

Contact potential carriers and freight forwarders to obtain detailed quotes for the shipment. Provide accurate and comprehensive information to receive precise quotes that reflect the specific requirements.

Analyze the quotes thoroughly; ensuring that all relevant charges are included, and any potential exclusions or hidden fees are clarified. This process enables effective cost comparison and negotiation.

An example of calculating freight costs shipping from China to the US

While calculating international freight charges from China to the US involves several factors such as the shipment's weight, dimensions, shipping method, and additional services.

  • Determine the shipment details and decide on the most suitable shipping method based on your requirements - air freight, sea freight (full container load or less than container load), and express courier services.

  • Contact multiple freight forwarders or logistics companies to request quotes for shipping your goods. Review the received quotes, considering factors like transit time, cost, insurance coverage, customs clearance assistance, and any additional services offered by the freight forwarders. Evaluate the reliability and reputation of the companies as well.

  • Once you have selected a freight forwarder, they will provide you with the final cost breakdown, which typically includes the following components:

  1. Freight charges: This depends on the weight or volume of your shipment and the chosen shipping method.

  2. Fuel surcharge: It is a fee to account for fluctuations in fuel prices.

  3. Customs clearance: If your goods require customs clearance, the freight forwarder may charge a fee for handling the necessary documentation.

  4. Insurance: Consider insuring your goods against loss or damage during transit. The insurance cost is typically a percentage of the shipment's value.

  5. Additional charges: Some additional costs may include customs duties, taxes, storage fees, delivery charges, or any specialized services required.

  • Once you are satisfied with the quote and have finalized the details with the freight forwarder, confirm the booking by providing the necessary documentation and payment information.

  • Stay in touch with the freight forwarder to receive updates on the progress of your shipment. They will provide you with a tracking number that allows you to monitor the movement of your goods.

Shipping from China is not complex once you grasped all the key points. It's important to note that freight costs can vary significantly based on the specific details of your shipment, prevailing market conditions, and any unforeseen circumstances. Therefore, it is advisable to obtain quotes from multiple freight forwarders and carefully evaluate their services before making a final decision.

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