| name | freight-pricing-mechanics |
| description | Veteran reference for building an accurate all-in freight quote — air chargeable weight (IATA 1:6000 volumetric vs actual), ocean CBM and weight/measure ton, the full ocean + air surcharge stack (BAF, CAF, THC, LSS, GRI, PSS, ISPS, AMS/ENS, DDC), margin methods (on-cost vs on-sell), and validity/volatility handling. Consulted by freight-rate-quoter. |
Freight Pricing Mechanics Skill
Purpose: give freight-rate-quoter (and any agent building a number) the exact math and the complete charge stack so a quote is all-in, correctly based, and margin-explicit. Pair the math here with the runnable scripts/freight_calc.py.
When to use
- Building or auditing any ocean / air / road quote.
- Settling the chargeable basis before pricing.
- Assembling the surcharge stack so nothing is missed.
- Choosing and stating a margin method, and setting validity on a volatile lane.
1. Chargeable weight — air
Air freight is charged on the greater of actual gross weight and volumetric (dimensional) weight.
- IATA volumetric weight (kg) = (L × W × H in cm) ÷ 6000, summed across all pieces.
- The 6000 divisor encodes the IATA ratio 1 m³ ≈ 167 kg (1,000,000 cm³ ÷ 6000 ≈ 166.67).
- Chargeable weight = max(actual gross, volumetric). Then apply the per-kg rate at the right break.
- Divisor caveats: some carriers and most express couriers use 5000 (≈ 200 kg/m³), which charges bulky cargo more. Always confirm the divisor for the carrier — it materially changes the number.
freight_calc.py air --divisor 5000 handles it.
- Rate breaks: air tariffs step down at weight breaks (often N, +45, +100, +300, +500, +1000 kg). Always check whether "weighting up" to the next break (paying for more kg at the lower rate) is cheaper — a classic quoting optimization.
2. Chargeable basis — ocean
- FCL (Full Container Load): priced per container by type — 20'GP, 40'GP, 40'HC (high-cube), 45'HC, reefer, open-top, flat-rack. The box is the unit; weight matters only for overweight/axle and some inland rules.
- LCL (Less than Container Load): priced per weight/measure (W/M) revenue ton, where 1 W/M = the greater of 1,000 kg (1 metric tonne) or 1 CBM.
- CBM = L × W × H in metres (1 CBM = 1 m³). For a carton in cm: (L×W×H) ÷ 1,000,000.
- So LCL chargeable units = max(total CBM, total weight in tonnes).
freight_calc.py ocean computes both and returns the billing basis.
- LCL also carries minimums (often a 1 W/M floor) and origin/destination handling (CFS) charges.
- TEU/FEU are capacity units (20'/40'-equivalent), used for vessel/space planning and some surcharges — not the customer billing unit for FCL (that's per box).
3. The surcharge stack (name them all)
A base ocean/air rate is not a quote. Build the all-in by stacking the applicable charges. Common ocean lines:
| Code | Name | What it covers |
|---|
| BAF | Bunker Adjustment Factor | Fuel-price volatility. Sometimes folded into an all-in rate. |
| LSS | Low-Sulphur Surcharge | IMO low-sulphur fuel compliance (can overlap/replace part of BAF). |
| CAF | Currency Adjustment Factor | FX volatility, usually a % of base (commonly ~2–8%). |
| THC | Terminal Handling Charge | Port/terminal handling — origin THC (OTHC) and destination THC (DTHC) are separate. |
| GRI | General Rate Increase | Carrier-announced base-rate increase, effective a set date. |
| PSS | Peak Season Surcharge | Demand peaks (e.g., pre-holiday, pre-CNY). |
| ISPS | Security (ISPS Code) | Port-security charge. |
| AMS / ENS / ICS2 / ISF | Advance manifest filings | US AMS + ISF(10+2), EU ENS / ICS2 — pre-arrival data filings. |
| DDC | Destination Delivery Charge | (Mainly US) destination handling. |
| Doc / Telex / Seaway | Documentation | B/L issuance, telex release, amendments. |
| Customs / clearance | Brokerage | Export and/or import clearance if in scope. |
| Haulage / drayage | Inland | Pre-/on-carriage trucking or rail. |
| Accessorials | Variable | Demurrage, detention, waiting time, gen-set (reefer), OOG, hazmat/DG, fumigation, VGM. |
Air adds: fuel surcharge (FSC) and security surcharge (SSC) per kg, plus screening, AWB fee, and airport handling. Which lines apply, and who pays them, is set by the Incoterm — see the incoterms-2020 skill.
4. Margin — say which method
Two methods, different results — always state which:
- Margin on cost (markup):
sell = buy × (1 + m). A 12% markup on a 1,000 buy → 1,120 sell; the gross margin is only 120/1,120 ≈ 10.7%.
- Margin on sell (gross margin):
sell = buy ÷ (1 − m). A 12% gross margin on a 1,000 buy → 1,000 ÷ 0.88 ≈ 1,136 sell.
- Always report buy, sell, margin absolute, and margin % — and the method.
freight_calc.py quote --margin 12% defaults to on-cost markup; pass --margin-on-sell for gross-margin.
- Per-shipment vs blended: a thin margin on the freight can be backed by accessorials, customs, and value-added services — quote the components, know the blended margin.
5. Validity & volatility
- Every quote carries a "valid until" date. Ocean spot rates move fast; air follows capacity.
- On volatile lanes, mark GRI / PSS / BAF as subject-to-change, or quote a shorter validity, or use a floating-surcharge clause that passes through the published change.
- All-in vs subject-to: an "all-in" rate (base + BAF + CAF + LSS folded) gives the customer certainty but transfers volatility risk to you — price that risk in or keep validity short.
Recommended resources (read on demand)
resources/surcharge-glossary.md — every code expanded with who-typically-pays and overlap notes.resources/worked-examples.md — three fully worked quotes (FCL, LCL, air) end-to-end with freight_calc.py commands.
Hand-offs
- Who pays which surcharge under the deal's Incoterm →
incoterms-2020 skill / trade-lane-compliance-advisor.
- Packaging multiple priced lanes into a bid →
rfq-tender-response skill / rfq-tender-strategist.
