AIR FREIGHT RATE

Prepared by Mrs.M.Janani Department of Commerce (International Business) Government Arts College, Coimbatore – 18. Reference: Logistics Management & World Seaborne Trade - Krishnaveni Muthiah •A freight rate is a price at which a certain cargo is delivered from one point to another. The price depends on the form of the cargo, the mode of transport (truck, ship, train, aircraft), the weight of the cargo, and the distance to the delivery destination. Many shipping services, especially air carriers, use dimensional weight for calculating the price, which takes into account both weight and volume of the cargo. •Freight Rate, the cost of transporting goods, is reflective of a number of factors aside from normal transportation costs. •The main determining factors of freight rate are: mode of transportation (truck, ship, train, air craft), weight, size, distance, points of pickup and delivery, and the actual goods being shipped •One of the earliest forms of freight transportation was by water. Many of the earliest settlements were built along or near seacoasts and navigable inland waterways. As these settlements grew, roads and later railroads and pipelines had to be built to transport freight to and from the navigable waterways, thus connecting the inland points of pickup and delivery which could not be reached by navigable waterways. The development of roads, railroads, and even pipelines allowed for the expansion of settlements inland and away from water ways. Transportation by ships is very limited in nature. If there are no navigable waterways close to the pickup point and destination then a good will not be transported by a ship. Rarely is any good transported solely by ship; usually goods coming into ports by ship must be unloaded and transferred onto another mode of transportation i.e. truck or railcar for transportation to its final destination. With the expansion of railroad systems and the development of more efficient trucks, the transportation of freight by ships became less cost effective. •The air freight rates can be classified in the following manner •General Cargo Rate (GCR) •General cargo rates apply to the carriage of commodities that have not been allocated a specific commodity rate or commodity classification rate. General cargo rates consist of minimum rate (M), normal rate (N), and lower charge in higher weight (Q). •Specific Commodity Rate (SCR) •Specific commodity rates are usually lower than general cargo rates and are published for particular commodities from a specified point of origin to a specified destination point. They are subject to a minimum weight restriction. Specific commodity rates take precedence over class rates and general cargo rates. When the class rate or the general cargo rate applicable to the consignment is lower than the Specific Commodity Rate, this lower rate can be applied. When the Class Rate is higher than the General Cargo Rate, the Class Rate takes precedence over General Cargo Rate. •Commodity Classification Rate (CCR or Class Rate)

•Commodity classification rates, also known as class rates, are published for particular commodities from a specified point of origin to a specified destination point and are usually shown in Surcharged (S) or Reduced (R). Class Rates take precedence over General Cargo Rates regardless of comparisons.

•Commodity classification rates, also known as class rates, are published for particular commodities from a specified point of origin to a specified destination point and are usually shown in Surcharged (S) or Reduced (R). Class Rates take precedence over General Cargo Rates regardless of comparisons.

•Newspapers, Magazines, Periodicals, Books, Catalogues, Braille-Type Equipment and

Talking Books for the Blind

•50% of normal GCR shall apply to the above commodities and the minimum charge will be either the minimum charge for the specified sector or the amount you get by multiplying such discounted rate per kg/lb by the minimum chargeable weight (5kg), whichever is higher. •Baggage Shipped as Cargo (R)

•For carriage of baggage shipped as cargo (excluding machinery, jewelry, cameras, merchandise and salesman samples), 50% of normal GCR will apply, and such baggage is subject to a minimum charge for 10 kg. This rate is applicable only when passengers travel from Korea to

IATA area 2 and area 3. The baggage must be delivered to the carrier no later than the passenger’s departure date, and the passenger or his agent is responsible for customs clearance.

•Live Animals(S)

•All live animals (including cold blooded animals) rates are 200% of Normal GCR.

•All live animals (including cold blooded animals) minimum charges are 200% of applicable minimum charge.

•Shipper’s Letter of Instructions: It is the shipping instructions to the forwarder or carrier from the shipper or exporter. •An Export License: It is a government document that authorizes the export of specific goods in specific quantities to a particular destination. This document may be required for most or all exports to some countries or for other countries only under special circumstances. •A Packing List: It itemizes the material in each individual package and indicates the type of package, such as a box, crate, drum, or carton. It also shows the individual net, legal, tare, and gross weights and measurements for each package (in both U.S. and metric systems). Package markings should be shown along with the shipper’s and buyer’s references. The list is used by the shipper or forwarding agent to determine the total shipment weight and volume and whether the correct cargo is being shipped. In addition, U.S. and foreign customs officials may use the list to check the cargo. •A Cargo Insurance Certificate: It is used to assure the consignee that insurance will cover the loss of or damage to the cargo during transit. •AIR FREIGHT CONSOLIDATION

•Freight consolidation is a shipping service that can lower the total shipping cost as well as increase security. Freight consolidation is just one of the many names given to the service, including consolidation service, assembly service, and cargo consolidation, but no matter what a provider chooses to call it, the concept remains the same.

•Freight consolidation is a process in which several small shipments that are all being sent to the same location will be bundled, or consolidated on a single truck, and then shipped together to their destination. The process is not only beneficial to the shipper, but also the customer or retailer to whom the products are being sent.

•Because of the consolidation and shipping multiple products all at the same time rather than sending multiple smaller shipments separately, shippers are able to pay bulk rates. This makes freight consolidation ideal for companies who generally send a few pallets of product at a time, or those who have a high frequency of smaller shipments. Instead of sending them all separately, the shipments will be consolidated and shipped in one container. •Advantages

•1. Significant Cost Advantages

•Not only are there numerous advantages to freight consolidation in general, but there are actually multiple ways in which it can save you money. Perhaps the best news is that anyone that is using less than truckload shipping can benefit from freight consolidation. The process will save your business money on the shipping end, thus making it more profitable, because the logistics are now more efficient.

•These savings occurs because you will share the cost of shipping because you will typically combine your freight with that of other companies on the same truck. No longer will you pay for empty truck space that you don’t use because you aren’t shipping enough product to fill the container. You will only pay for the space your cargo takes up and nothing more.

•By optimizing how you use space in the truck in partnerships with other companies who ship to the same region, your overall cost of shipping will be lowered. You’ll also save by getting bulk rates for your shipment should you be able to fill the entire truck yourself with multiple shipments of your own. •If you receive shipments, you can also reduce how much you’re spending on freight for your inbound inventory. The all-around savings leads to a better relationship with you and your customers. •By using freight consolidation, you can also avoid the heavy costs that come along with storage sites, inventory management facilities, and having your own fleet of vehicles. Freight consolidation providers can often provide these for you, should they be necessary., in order to manage your consolidation until it is sent to the final delivery. You won’t have to store your shipment on your own — you can send it to the facility where it will be shipped to retailers from, which helps streamline the process should more inventory be needed. •And taking things a step further, having fewer trucks on the road also means you will be spending less on fuel, as well as spending less per-mile on the shipment, since it will be one truck, rather than multiples. •The savings can be significant enough to make a big difference in your company’s bottom line, and help to boost your profit margin. This can be a real difference-maker for mid-sized and smaller businesses who have their profits cut into greatly by shipping costs. •2. Safety Advantages •Things happen in shipping, it’s just a reality of doing business in which you ship products, but using freight consolidation can actually greatly reduce the risk involved. When you have systems in place and use an experienced shipper to handle your freight, your products will be in safer hands. And not only that — it will be in those hands less often, as there are fewer transfers involved in the shipment, meaning it won’t be handled as much as it would in other shipping methods. •Having your freight consolidated means that it will be on fewer trucks, making the odds smaller that one will be involved in an accident. This, in addition to the quality handling of an experienced provider, can give you peace of mind that your consolidated freight will safely reach its destination time after time. •And it actually goes beyond safety too, freight consolidation comes with added reliability as well. Because your product is handled less, there is a lower risk that something will go missing, or be sent to the wrong delivery point. There also is less of a chance that something will interrupt your delivery and cause it to be late. This all adds up to happy customers on the other end of your shipment. •3. Improve Customer Satisfaction •Obviously, having satisfied customers is a great benefit in itself. They may love your products, but you can harm your relationships with customers if you can’t consistently get shipments to retailers on time or keep up with their demand. •Using freight consolidation helps you to get your product to customers quickly and efficiently. This is especially true if you send inventory in advance to the consolidation facility. When an order comes in, your partner will send the product directly from the center, rather than having to come pick up more from your company. This allows you to stay ahead of demand, and be on top of your customer’s needs. •4. Manage The Entire Shipping Process •Using freight consolidation also gives you more control over your due dates and production schedules. You will also be able to manage the entire distribution chain either on your own, or through a logistics partner. Having more control over your shipment will notify you sooner, so things aren’t sent to the wrong destination. •If your shipping partner discovers issues with your shipment, it will then fall to your provider to remedy the problem. This takes control of delivering your product out of your hands, and makes the process less efficient. By consolidating your shipment, you will implement quality control measures at a warehouse close to your retailers that will help reduce the chances your orders lose time or quality. •5. Increased Consistency •Once you learn the ordering patterns of your customers, you can build them into your consolidation plan. This allows you to have inventory readily available for your customers and not be scrambling to fill orders. Having a consistent shipping schedule will also help you to better take advantage of the savings that freight consolidation provides, as it will help ensure you can fill up the space you require. •When you increase the consistency of your supply chain, you will lessen the odds that you have a late shipment, missing product, or a shipment sent to the wrong retailer. It will streamline your overall shipping process, keeping your customers satisfied. •6. Improve Your Customer & Carrier Relationships •By shipping smarter and more efficiently, you will be able to build relationships with other companies, customers, and your carriers. •First, you can establish relationships with other businesses who rely upon LTL shipping. Once you learn that another company sends a similar product, or a similarly-sized load on the same schedule to a shared retailer, you can establish a shipping partnership that will help reduce the costs for both of you and build smarter loads. I A TA

The International Air Transport Association:

• IATA was founded in 1946 by the airlines of many countries to meet the problems created by the rapid expansion of civil air services at the close of the second World War in 1946.

• It is the Successor in function of the previous International Air Traffic Organization arranged at "The Hague" at the very dawn of regular air transport in 1919.

• As a non-g0vermmental organization it draws its legal existence from an Act of the Canadian Parliament given

Royal Assent in December 1945.

• In both its organization and activity, IATA has been closely associated with the International Civil Aviation

Organization (ICAO) also established in 1945, the international agency of governments which creates world standards for the technical regulation of civil aviation.

• IATA is a voluntary, non-exclusive, non-political and democratic organization.

• Membership is automatically open to any operating company, which has been licensed to provide scheduled air services by a government eligible for membership of ICAO.

• Airlines directly engaged in international operations are active members, while domestic airlines are associate members. •The voting procedure of IATA are unusual when compared with those of other international organisations. Each airline has a single vote regardless of its size. All decisions must be unanimous. No decisions are effective without the approval of the interested governments.

Thus any single airline or any single government has the power to veto any decision.

• IATA is concerned with much more than traffic matters. It has committees dealing continuously with technical, legal and financial issues. IATA, through these committees, promotes standards of safety, comfort and efficiency. Rules and procedures govern airlines in all parts of the world. An effort is made to simplify and standardize the documents which must flow from one airline to another. The Association publishes manuals of Revenue

Accounting Practices which aim at the standardization of the reporting of costs, profits and losses. The IATA Clearing House in London settles monthly accounts for interline revenue transactions, making it possible for each airline to pay and collect debts in a single settlement. • The airlines have achieved a great deal of standardization through IATA.

• IATA member airlines adopted the first standard procedures for handling interline traffic at an IATA Traffic

Conference in 1947, and these have been developed further over the years through the extensive IATA Traffic

Services machinery.

• The agreements are now the responsibility of the Passenger and Cargo Service Conferences respectively.

• The IATA Traffic Conferences: The steps in establishing traffic on international routes are different from those of domestic routes. Before the tariffs are filed with the respective governments for approval, the airlines meet together to agree on a pattern of rates. These rates apply to all the carriers concerned. Unless all agree, no decision is binding. And the government have the final say on whether the agreements can be maintained. The normal practice is for the airlines to reach an agreement after considerable give-and-take in the Traffic Conferences and for the governments to approve those agreements. Occasionally the conferences fail to reach an agreement or one or more governments fail to sanction the agreements, but such failures of agreement are the exception rather than the rule.

Furthermore, soon after a conference has failed to achieve an agreement, the airlines and governments become quite uncomfortable with the possible anarchy in rates which might ensue; thus they soon reconvene to avoid this possibility. It is also the practice of each airline to refrain from vetoing an agreement affecting territories outside its main routes. • The world is divided into three areas for the purpose of the Conferences. Area No. 1 covers the

Americas, Area No.2 covers Europe, the Middle East and Africa and Area No.3 covers the rest of the world. Meetings deal separately with the relations between Area No.1 and Area No.2, No.2 and No.3 and No.3 and No.1. But the most important work takes place in the Composite

Conference covering the whole usually held every two years. Individual airlines make recommendations of tariff changes at these conferences. Traffic working groups and cost committees make careful studies of prospective traffic and cost of operation. The agreement reached by past conferences consists of over 1000 resolutions covering rates between 60,000 pairs of points in the world network.

• Among the criteria of rate-making considered by the Conferences are the following: (a)

Operation costs (b) Traffic potential (c) Local economic conditions (d) Type of traffic to be moved

(e) Seasonal nature of the traffic (f) Competition from non-IATA carriers such as the Steamship

Companies. THANK YOU