Unpacking Air Freight Rates: From Tariffs to Surcharges

A breakdown of air freight charges

Air freight charges are built from different components starting from a primary air freight rate but often including many additional surcharges. It can be difficult to understand your total cost without an understanding of the composition of each line item

Total Cost = (Air Freight Rate + Surcharge Rates) x Chargeable Weight + Flat Surcharges

• Air Freight Rate = Price of air freight in dollars per kilo ($/kg)
• Surcharges = Various additional charges as rates ($/kg) or as flat fees
• Chargeable Weight = This is greater of the gross weight of a shipment or the volume weight in kilos (kg).  This concept is described in detail in another post. 

Air Freight Rate

The main component of the costs is the actual rate, also known as the tariff, which is being charged on a per kilo basis.  This actual tariff is based on airports of origin and destination. 

Carrier’s tariff rates are designed in a way to adjust to expected seasonal demand with a typical validity from 1 to 6 months. As it is based on estimated demand, the rates can be quite high and, therefore, carriers also offer shorter-term promo rates or specific rates for individual shipments, called spot rates.

Capacity at the time of booking is what drives the tariff that is offered. If the carrier's flights are empty you can typically secure a discount or vice-versa when capacity is tight. It is recommended to check for spot rates for any cargo with a chargeable weight over 500kg but this changes based on the market.  

While the tariffs depend mostly on the demand, surcharges depend on other factors.

Common Surcharges

Fuel surcharge (FSC) - this is the reflection of current fuel prices and is adjusted accordingly.  Many carriers adjust their fuel surcharge on a weekly to monthly basis.

Security surcharge (SSC) - this is a pretty consistent surcharge that the carrier charges for labor costs that are required to make sure all the security requirements are met. It includes the physical inspection of the cargo to make sure the commodity on the manifest matches the content of the cargo. The inspecting of the paperwork to determine if there are any restricted items being exported, party screening to make sure all the parties are legitimate and the product they ship is actually in line with the nature of the business they do.

Screening surcharge (XRC) - this is another constant surcharge. As of June 2021, the TSA (Transport Security Administration) requires 100% of cargo exported from the US to be screened. This is a fee to reimburse the expenses that a Screening Facility charges the carriers for screening cargo by various methods.

EDI surcharge - EDI stands for Electronic Data Interchange and helps the carriers receive final cargo details via EDI connection to allow them to control their capacity in real-time and submit some information like HS codes promptly to overseas customs authorities or interline partners. Carriers typically charge a flat fee per AWB to handle this data transmission.

These are the main fees that almost all the rates include. 

Other surcharges - these can be specific to the destination, type of product, or market situation.  Here are some examples:

• War surcharges fees or War risk surcharges (additional fees during wartime that are designed to cover additional transportation and security costs) 
• Covid fee (additional fee during the Covid restrictions that was intended to cover additional labor costs for Handling Agents)
• Customs Bureau Fee for transshipments
• ICS2 surcharge (surcharge for Import Control System – the fee for the new customs pre-arrival security and safety program monitors the security of EU external borders)
• Charges Correction Advice (CCA) - this is a flat fee airlines charge if there is an error with paperwork and the carrier needs to correct a mistake.

Example Air Freight Charge

Below is an example of how an Air Freight charge is built.

It should be noted that the total rate is the Total Cost / Chargeable Weight and not simply a summation of the line item rates.

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