How to Read and Understand Your International Airfreight Bill
Expedited shipping is becoming increasingly vital for a growing global economy.
Consequently, air cargo accounts for approximately 35% of total world trade or over $6 trillion worth of goods annually.
Many businesses are turning to airfreight services for a quick and safe mode of transport for their products. However, airfreight services are pricey and can include significant customs duties and taxes. This guide will help you understand your airfreight bill, so you’re clear on the terminology, fees, and charges.
Airfreight shipment charges are worked out by the “chargeable weight.”
The chargeable weight number on your bill is the amount the carrier has charged to move your shipment. It is calculated in the following ways:
- The volumetric weight or dimensional. This is the volume of your cargo converted into a weight equivalent
- The gross weight, including the product, packaging, pallet, etc.
How Is the Chargeable Weight Calculated?
The volumetric weight is calculated at: 6,000 cubic centimetres = 1 kg. Thus, dividing the cubic centimetre volume of cargos (W x L x H) by 6,000 will provide the volumetric weight.
For instance, if your consignment is 70 x 110 x 110 cm and the actual weight is 400 kg, here’s how the volumetric weight is calculated:
Volume: 70 x 110 x 110 cm = 847,000 cm3
Volumetric weight: 847,000 cm3 / 6000 = 141 kg
In this instance, the chargeable weight is 400 kg because the actual weight is more than the volumetric result.
Another essential point to understand on your airfreight bill is “weight breaks”. The larger your freight, the less you pay per kg at fixed breaks. For instance, if your cargo is more than 200 kg, your rate could be £4/kg, but if it’s higher than 400 kg, the amount may drop to £1.75.
The fuel surcharge is the price charged by the airline to cover unsteady fuel prices. As oil prices fluctuate, it will appear as a fuel surcharge on your bill. The fuel surcharge is applicable per kg of chargeable weight.
How Do You Calculate Fuel Surcharges?
Fuel surcharges are typically known as carrier-imposed surcharges. Here are the three main elements of a fuel surcharge calculation:
- The average price of fuel
- Price protection point
- Mile per gallon (MPG)
If, for instance:
- The average fuel price is £2.82
- The price protection point is £1.26
- Miles per gallon is 6.0
Using the international code council equation, the fuel surcharge cost (FSC) will be as follows:
- The average fuel price – price protection point/ MPG
- £2.82 – £1.26/ 6.0 = £0.26/miles (FSC)
Ex-work is an incoterm, an internationally recognised rule that outlines the trade terms and responsibilities of buyers and sellers. They include incoterms ex-works and are used to define costs and risks throughout the airfreight process.
Incoterms ex works on a shipping quote is abbreviated to EXW and referred to as “origin charges”. The incoterms ex-works cover the cost of transporting your cargo from your supplier to the origin departure port. The incoterms ex-works fees include clearance, customs, licenses, etc.
The documentation fee is a surcharge set by your airfreight line to cover the expenses of preparing the necessary documentation to ship your goods.
If you’re covered by insurance, you’ll see an insurance charge on your airfreight bill. For example, insurance can be charged at a rate per £100 of value, e.g., £0.45 per £100. A charge like this is often the same for general commodities. General commodities include new products that are not easily breakable, like auto parts or footwear. Fragile items, including glassware, are charged at a higher rate.
The customs entry fees pay the customs broker to submit the required costs and documentation to clear your goods through customs. They offer expert knowledge in all areas of the clearance process in regard to customs duties and taxes and can move your goods quicker and more efficiently.
How Much Does a Customs Broker UK Charge?
Traditionally, the cost of a customs broker varies widely in the UK for a standard clearance at airports. The price you pay for a customs broker UK usually depends on experience, expertise, and the efficiency of their service.
A custom broker typically prefers to offer a customised quote as their fee, depending on the products you’re moving, their value, and their point of origin. For instance, if the goods require licensing, this may cause additional work for the broker, and they add a fee to cover it.
Here are some examples of what you can expect to find on a customs broker itemised quote:
- Airline handling, accessed by delivery weight, at least £45
- Airline bond transfer fee of at least £15
- Bank transfer and agency fees which could mount up to £65 or more
- Custom clearance admin costs
- Airline or port storage fees, if required
- Government agency fees
- Onward delivery costs, if applicable
Some custom brokers may charge an upfront flat fee as low as £29. However, you’ll need to go through the small print or added extras that can quickly and significantly increase the total cost.
In addition, you’ll need to factor in fees to cover customs duties and taxes to determine the total cost of importing and exporting goods to and from the UK. Customs duties and taxes are usually assessed on the percentage of the commercial invoice of your goods.
Airline Terminal Fee and Security
The airline terminal fee pays for the airline terminal handling of your cargo. Sometimes, you’ll see the charge split between the origin and destination airport on your airfreight bill.
The Transport Security Administration charges airline security fees to protect the airline transportation industry from safety and security threats. The cost will vary depending on your cargo weight, origin, and destination.
Airfreight Charges Explained
The airfreight bill allows you to see precisely how you’re being charged. An understanding of how charges like customs duties and taxes are calculated can enable you to consider ways to make savings. For example, seeing how much cargo weight you are being charged and increasing your cargo weight should decrease your chargeable weight.
However, there is no need to worry if you don’t completely understand how all the items on the bill are calculated. A reputable airfreight forwarding company can help you navigate the airfreight world.
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