by W.E. Reinka, an international shipping consultant

Whenever I read a newspaper that features an article on international trade issues, my skin crawls when it refers to carriers as “shippers,” as in “Port Director Felix Catnip predicted that the new cargo tracking system would attract several large shippers to the port.”

Port Director Catnip really wants to attract carriers. It’s up to the carriers to attract the shippers.

Here’s a simple run down of Who’s Who in the shipping business.

Let’s say that Florida Fender in Miami ships 10 crates to Andy’s Automotive in Atlanta via Acme Trucking.

SHIPPER

The party that initiates a shipment. In our case, Florida Fender. Occasionally, the shipper is called the Consignor.

CONSIGNEE

The destination party or receiver of the cargo. The person to whom the shipment is consigned, in this case Andy’s Automotive.

CARRIER

The firm that actually transports the goods, in our case Acme Trucking. An air carrier is the airline, an ocean carrier is the vessel operator that transports the goods. A few old-timers still refer to ocean carriers as “steamship lines.” Transportation lawyers are likely to refer to truckers as “motor carriers.”

NOTIFY PARTY

A notify party has an interest in the shipment though it may or may not be part of the commercial transaction. For example, an import shipment may show ABC Customs Brokers as a notify party. The Customs broker must be kept in the loop in order to clear Customs expeditiously. You might be the Notify Party when you purchase products overseas but reduce your costs by consigning it directly to your customer. The air waybill would show your customer as the consignee but you’re notified of its routing and arrival.

FORWARDER

A third party which typically helps to arrange the shipment in behalf of the shipper or consignee. In air freight especially, the forwarder may occasionally also serve as carrier. For example, DHL might act as forwarder and ship the goods on its own aircraft.

CONSOLIDATOR

Similar to or the same as a forwarder. As the term implies, the consolidator aims to combine multiple shipments for rate and handling advantages. It keeps a portion of the savings as profit and passes the rest of the savings to the shipper or consignee.

SHIPPING AGENCY OR ADVISOR

Often operates as a franchise or affiliate of a forwarder or carrier. They obtain business for their franchisor and, in the process, guide their customers with shipping advice, documentation requirements, packing and other details. Freight savings are also a frequent benefit.

AGENT

A general term for one party which acts officially on behalf of, and with the approval of, another. Ocean carriers may have their own offices in major port cities and then employ agents (who may represent several lines) in smaller metropolitan areas. An ocean freight forwarder serves as transportation agent for exporters. An airfreight forwarder is usually legally the agent of the airline, not the shipper. In cases such as bankruptcy or negligence, the legal structure and limits of agency can be a major factor in settlements.

by W.E. Reinka, an international shipping consultant

by W.E. Reinka, an international shipping consultant

What’s this? My trucker charged me for 1,000 pounds when I only shipped 820 pounds.

Relax. Your carrier applied the Minimum Quantity Rule which actually saved you money. What’s more, it provides you a way to make more money.

Minimum Quantity Rates apply when it is cheaper to rate a shipment at a greater weight but lower rate. Tariff jargon goes something like: The total freight charges assessed against a shipment may not exceed the total charges computed for a larger quantity.

It’s easier to explain by example.

We’re shipping 820 pounds of widgets by truck.

The widget rate for 500 pounds is $10.00/cwt (per hundred pounds)

820 pounds X $10.00/cwt = $82.00

For 1,000 pound shipments the widget rate drops to $7.50/cwt.

1,000 pounds X 7.50/cwt = $75.00

The motor carrier rate clerk bills the shipment “as 1,000” and charges you $75.00 instead of $82.00. (Incidentally, you will probably find that many large truck shipments, say those over 12,000 pounds, go cheaper “as truckload.”)

Minimum Quantity Rates are an opportunity

Minimum Quantity Rates provide an opportunity to offer discounts to our customers and make more money ourselves. Keeping the math simple, let’s say our widgets cost us $0.50 each, weigh exactly one pound each and we sell them for $1.00 per widget. In the above scenario, we would have an invoice value of $820.00 for 820 widgets. Shipping cost is $75.00 or approximately $0.091 per widget.

The Minimum Quantity Rate alerts us that we could ship an additional 180 widgets with no increase in freight charges (820 widgets plus 180 equals 1,000 widgets—exactly a 1,000 pound shipment). Our shipping cost is now $0.075 per widget. We offer a reduced price to our customer for a larger order while making more money for ourselves.

Original Shipment

820 widgets sold at $1.00 each, cost $0.50 each

$820.00 invoice value less $410.00 cost less $75.00 trucking equals $335.00 profit

Discount Shipment to Customer

1,000 widgets discounted to $0.97 each, cost $0.50 each

$970.00 invoice value less $500.00 cost less $75.00 trucking equals $395.00 profit

The freight savings more than makes up the $30.00 manufacturing discount we absorbed.

Minimum Quantity Rates are common with truckers, frequent with airfreight and almost unheard of with sea freight, which generally doesn’t see much in the way of tiered rates.

by W.E. Reinka, an international shipping consultant