Why is it important to know how to calculate ocean freight charges? Shippers don’t have control over ocean carrier rates or the extra charges that tend to get added on. On the other hand, by carefully managing quantity and timing, a shipper can still learn to calculate the most cost-effective way to ship their goods.
Organizations such as the International Chamber of Commerce (ICC) and the International Maritime Organization (IMO) have set standards for business dealings and safety in the ocean freight industry. They don’t control freight rates, but they have encouraged carriers to adopt common ocean freight rate calculation formulas.
By learning how to apply modern ocean freight calculations, shippers can better plan their logistics budget and find ways to make it more efficient.
When planning a shipping budget, shippers should be aware of what causes freight rates to fluctuate and the cost calculations typically used by carriers. In the spirit of smoothing over international relations, nearly all ocean carrier services charge their clients in the same way.
Prices change, of course, but how your shipping order is processed remains fairly constant. Calculations for containerized shipping are the simplest and are very similar to those used in other industries, such as trucking.
The process gets trickier for non-containerized shipments, such as:
Once you know the basic math used by carriers, you can apply them to your shipping needs and get a reliable estimate based on current market rates. It won’t be 100% accurate, but it will provide a solid basis for budget planning.
A freight rate is simply the price you are charged to move cargo from one point to another. Ocean freight rates work by setting prices based on factors that affect operating costs or risks.
Outside economic supply and demand, such factors include things like:
At the same time, rates are impacted by your preferred shipping method. A bulk cargo ship and a RoRo carrier will charge differently because the commodities and methods are different. The same applies to container vessels.
Within container ships, rates will also change based on two common practices.
Within these two practices, you will still see differences because of the type or size of the container. Marine shipping containers have become standardized enough to actually count as a unit of measure. The most common being TEUs, or twenty-foot equivalent units.
Containers do come in other sizes and heights, with the next most popular being FEUs or 40-foot containers. When researching rates, you may come across pricing based on TEU as a common starting point.
Find out more about the eight common types of shipping containers and what commodities they carry.
Flat rates for FCL shipments are pretty simple to calculate. The carrier is going to start off with a flat rate for the container and negotiate from there. Weight and volume might be a factor if you are shipping something that is very heavy, or if you are shipping something out-of-gauge in a platform or flat rack container.
It’s when you need to ship using LCL that calculations and rate changes get a little trickier.
In LCL, more than one client’s orders are in the same container. Using a flat-rate pricing method, such as charging by square footage or cubic space, ignores weight considerations and vice versa.
Each method is based on a different calculation:
If carriers use only one method to charge, they may lose out on some profits. For example, if they only charge by gross weight, a shipment of something large but lightweight, like an order of tennis balls, would cause them to lose money. The same thing happens if carriers use the dimensional weight to price out a small but heavy order, such as a pallet of metal bolts and screws.
To make up for any losses on either end, LCL shipment rates are instead based on the chargeable weight.
In simple terms, a carrier will calculate both the gross weight and dimensional weight of your shipment and charge you the highest of the two. Your chargeable weight is what sets the starting point of your sea freight rate.
Gross weight is calculated the same no matter what transport mode you use. Dimensional weight math varies from mode to mode. Officially, it’s called the DIM factor and a different version is used for sea freight, air freight, and even courier shipments.
The DIM factor used in sea freight calculation formulas follows a 1:1,000 rule. This means that 1 cubic meter is equal to 1,000 kg or 1 ton. Anything under 1 ton will use a shipment’s cubic meters to determine chargeable weight.
This DIM factor can be used in two different volumetric weight formulas:
Carriers may favor one formula over the other, but the result is nearly identical either way. When you are doing your own estimates, remember to use the metric system – the accepted international standard. Lengths are all measured in centimeters or meters and weight is measured in kilograms.
Sea freight volume is calculated by measuring a shipment’s dimensions in metric units to find total cubic meters. We’ve already reviewed the two sea freight formulas most used.
Freight volume is also calculated in terms of container pallet capacity. These estimates are important for shippers leaning towards FCL rather than LCL shipments.
Shippers should become familiar with both, especially if planning out an international freight budget for the first time. It may be worth it to ship FCL, even if your products don’t take up the entire container.
We’ll look at the cubic capacity and pallet capacity for the most common shipping containers.
| Container Size | Cubic Capacity | Average Pallet Capacity |
| 20-Foot Container | 33 CBMs | 10 |
| 20-Foot High Cube | 36 CBMs | 10 |
| 40-Foot Container | 67 CBMs | 21 |
| 45-Foot High Cube | 86 CBMs | 23 |
Pallet capacity here is based on floor space using the most common pallet size in the United States. Depending on your products, you may be able to stack your pallets to use the space even more efficiently. If your products are shipped in average-sized Europallets, you may be able to fit a couple more.
The general rule of thumb is that if a shipment’s CBM is greater than 15, it’s better to ship with FCL rates, which average less than LCL rates in a direct comparison. Even so, it really depends on what you are shipping and how often you need to get new inventory.
LCL does come with some distinct disadvantages that shippers should know about:
With supply chain routes still struggling in some areas, anything that can cause a delay could be a deal breaker. The additional freight shipping costs due to de-consolidation can completely cut into any money you may have saved by using LCL over FCL services.
When in doubt, consult with an experienced ocean freight forwarder. They are better able to define the breaking point of your particular shipment and whether it’s more cost-effective to use FCL or LCL shipping.
Even if your shipment could qualify for FCL shipping, there are other reasons to insist on LCL. While de-consolidation might increase your freight costs, less inventory reduces your warehousing costs in the long run.
Any company looking to provide door-to-door service will have more luck getting a smaller shipment into a distribution or cross docking warehouse versus an entire container load.
We’ll show you an LCL shipment CBM calculation for chargeable weight calculations. Recall that because of the sea freight DIM factor, anything over 1 ton will automatically be charged by gross weight.
| Length, Width, Height (meters) | 3 m x 3 m x 3 m |
| Quantity | 2 |
| CBM | 54 ㎥ |
| Gross Weight | 500 kg (0.5 ton) |
| Freight Rate* | $45 per CBM or Ton |
| Gross Weight Price | 45 x 0.5 = $22.50 |
| CBM Price | 45 x 54 = $2,430 |
In this instance, the carrier is going to charge by CBM because it nets them an additional $2,400 compared to charging by gross weight. This shipment could fit into an FEU, and likely that would be the better method. These calculations are simply to show how the math works out.
Of course, that initial CBM, gross rate, or even flat rate price isn’t the end of the freight invoice. As mentioned at the beginning, there are a number of other line items that add to your final cost.
The most common additional fees include:
How many of these charges will appear on your invoice depends on what you have agreed to with your international supplier. The ICC established a set of rules known as Incoterms® which are used in international business agreements.
Depending on which terms are agreed to, some of these charges may be the responsibility of the supplier rather than the shipper.
The best source of information on these fees, including how much they might be, will be an experienced freight forwarder. Whether you work with an individual or an agency operating as a 3PL, they should have the knowledge to provide you with accurate data.
A W/M rate is an abbreviation for weight or measurement.
When a carrier or freight forwarder is discussing freight rates, they may use this term to identify whether a shipment is being charged based on gross weight or dimensional weight.
In other words, it’s another way of stating what method is being used to determine the chargeable weight. In a conversation, a freight forwarder may also refer to it as the ‘worm’ rate. Rest easy. It’s just common jargon within certain shipping circles, and no one is asking you about actual worms.
Revenue Ton, often abbreviated as R/T is yet another way of comparing the chargeable weight rates used for volume and weight.
The actual wording is ‘revenue per ton’ when it’s being discussed. Recall that ocean freight services, along with most others, are going to determine a shipper’s freight rate by whether volume or weight is greater.
This term is not often used with clients, like shippers, because it refers to how the freight companies directly profit from their pricing decisions.
Arranging international shipping is stressful. If you need help learning how to calculate ocean freight charges for your next business venture, trust USA Freight Forwarding Services to have the information you need. Powered by R+L Global Logistics’ extensive network of partners, we have the expertise and the network to get any job done.
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