Although most orders for garments are placed by buyers on FOB basis, with buyers to pay for freight at the shipping destination, it is still necessary for the shipper or the agent to know how to calculate sea freight and air freight as buyers always need to know how much freight the merchandise cost per dz. If you are required to sell on CIF basis, (with the shipper to prepay for freight at the shipping port) you will need to calculate the freight accurately for your own costing
Sea freight is usually charged based on volume as to how much per CBM (cubic meter),very rarely by weight as “density cargo”. In fact ANERA (Asia North America eastbound rate agreement)has designed the freight tariff more based on the usual value of the type of goods, than the usual weight of them, taking into consideration that for low value merchandise they should give a low freight rate in order to make it possible for the importers to buy goods overseas. However, for high value merchandise, they should charge a high freight rate, as it is believed that the buyer canafford to pay more on freight. The have designed the freight tariff in such a way that everybodycan do business and there is sufficient profit for the shipping lines.
FCL: Full container Loading
LCL: Loose container Loading
If you ship very heavy goods as loose cargo because the size of the shipment is very small, the shipping lines will charge you by weight or by volume which ever is higher.1 CBM (100 cm X 100 cm X 100 cm) = 1000 Kg
|1||CM||Cost of making\cutting and making|
|2||FOB||Freight on Board|
|3||C & F||Cost and Freight\ Clearing and Forwarding|
|4||CIF||Cost, Insurance and Freight|
|5||CIFI||Cost, insurance, freight and interest|
|6||CIFE||Cost, insurance, freight and exchange|
|7||COD||Cash on delivery|
|8||CEO||Cash with order|
|9||FOW||Free on Wagon|
|10||Franco||(Named Port of Shipment)|
|11||FOB||Free on Board(Named Port of Shipment)|
|12||CFR||Cost and FreightINamed Port of Destination)|
|13||CIF||Cost, Insurance and Freight (…Named port of Destination)|
|14||CPT||Carriage Paid To (…Named Place of Destination)|
|15||CIP||Carriage and instruction paid to (…Named Place of Destination)|
|16||DAF||Delivered at frontier (..Named Place)|
|17||DES||Delivered Ex Ship (…Named Port of Destination)|
|18||DEQ||Delivered Ex QUAY (…Named Port of Destination)|
|19||DDU||Delivered Duty Unpaid (…Named Place of Destination)|
|20||DDO||Delivered Duty Paid (…Named Place of Destination)|
Unlike sea freight, the airlines have decided to charge for the heavy merchandise (high densitygoods) by weight, and lightweight merchandise (low density goods) by volume. However, as airplanes can take less weight than ocean liners, the way they Set the standard, in the garment industry, when you ship goods by air, you have a 70% chance to be charged by weight, about 30% chance by volume.The followings are the relationship between weight and volume as set by IATA ( International air transport association).
a.From most shipping locations in the Far east to the U.S. destinations and Canada 7000 cubiccm = 1 kilo.
b.From certain locations in the Far east to the U.S. destinations and Canada 6000 cubic cm = 1kilo.
Therefore when you have low density goods to ship by air, in order to determine if you should try tomake the cartons as small as possible to save freight. First you check with the local air forwarding agent by asking him in the country where you are, how many cubic cm is considered 1 kilo inweight. They will tell you either 7000 or 6000. This is the answer you need.Then you physically check the weight and measurements of the good s packed for the air shipment. Now we have the 3 answers as follows, for example:
- The country is Bangladesh and the formula is 6000 cubic cm = 1 kilo
- The measurements of the cartons are 50cmX 60cmX 40cm
- The gross weight of the cartons are 16 kilo per carton.
Now let us find out if we should try to make the cartons smaller to save air freight by doing thefollowing calculation,Multiply 5 by 60 by 40 = 120000 cubic cm.120000 cubic cm divided by 6000= 20 kilo Now you know, by volume the one carton is of 2 kilo, but by actual weight the carton is of only 16kilo. You also know the airline will charge whichever is higher, in this case, they will charge you for 20 kilo, by volume. If the air freight rate is 2.80 per kilo this carton will cost you $56.00. Now, in order to save some money, let us try to make the carton smaller, usually by cutting theheight of the carton. Lets say we have succeeded in cutting down the height by 5 cm, and see how much money we can save.
Original size of the carton: 50 X 60 X 35 cm (=20 kilo)
Now cut down to 50 X60 X 35 cm= 105000 cubic cm.105000 / 6000 = 17.5 kilo
Now by using the new carton, we have saved 2.5 kilo and this carton will cost only $ 49.00 (17.5Kilo X 2.80)