Freight Rates: How They Are Determined

How Freight Rates Are Calculated

[Updated March 2022]

If you’ve considered less-than-truckload (LTL) shipping in the past but were unsure it was a better deal than shipping via a full truckload, there are several things you should know. First of all, most LTL shipments booked online are kept track of just like ‘regular’ shipping methods, in that modern technology is used to book and track your load.

Second and perhaps the more common concern some businesses have is the cost. Is it economically beneficial to ship LTL? That depends on your shipment needs, and the following are the basic guidelines used to determine freight rates.

Size and weight are probably the two largest factors that determine the cost of your shipment

However, the distance traveled and the commodity you’re shipping will also impact your shipping rates. Every item you ship as freight within, to, or from the US has a corresponding National Motor Freight Classification (NMFC) number and class. You are required to provide accurate measurements and the weight of your cargo. It is also very important that you identify your commodity; that is, what you are shipping.

Freight class also factors into your cost

A full explanation of how freight classification works can be provided by your freight specialist. Basic freight classification guidelines for LTL shipping involve the density (weight), the type of packing, the value of the shipment, the product’s susceptibility to damage, and your product’s load-ability and handling characteristics. Basically, the more fragile and valuable the product(s), the higher the freight classification.

Dimensional weight is another key to your shipping costs

That one can be confusing. Dimensional weight is a standard formula (used in the freight shipping industry) that takes into consideration a shipment’s density when determining shipping costs. While transportation fees are based on gross weight, they are also based on dimensional weight, or whichever is greater. Dimensional weight is used when the weight of a package is inappropriate to its size. For example, a box filled with inflated balls won’t weigh much but will take up a lot of space. Dimensional weight is a method of promoting space conservation in shipping.

As you can see, there are several factors that need to be considered when determining how much shipping costs will be. Either way, utilizing LTL shipping rather than full truckload is among the smartest ways for companies to save money on shipping.

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