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Essentially the laws of supply and demand fix the rates. The criteria for this was based partly on the principle of “charge what the trade can bear” that is the rates are pushed upwards until shippers begin to look for cheaper rates elsewhere. The lower end of the rate spectrum is, of course, governed by the need to ensure an operating surplus.
In reality, whereas all conferences were able to set their own rates, they were all constrained by the rates being set by non-conference operators.
Freight charge is the consideration paid by the shippers or consignees to carrier for moving their cargo (transportation from one location to an other location) for using vessel space of liners. The allocation of space to accommodate the cargo and to transport it from the port of loading till the discharge port has got different type of expenses to the liner and the income out of such transporting should be more than the cost of such movement. The freight rates are set after taking into consideration of various factors as detailed below:
FACTORS CONSIDERED WHILE FIXING FREIGHT RATE
- The weight and the measurement of the commodity being shipped
- The value of the commodity
- The distance.
- Efficiency of the port of origin and port of destination.
- Maintenance cost of the containers
- Port charges including tug hire, pilotage, port dues, lighterage etc.
- Cargo handling expenses (cranage etc)
- Various taxes
- Freight forwarding, cargo brokers commission.
- Nature of the cargo
- Fuel / bunker costs & fuel efficiency of the ship.
- Canal dues.
- Cargo availability at the ports of call.
- Charter market demand & supply of ships.
- Equipment repositioning cost.
- Vessel frequencies and speed of the vessel and transit time.
- Value added service.
- Other ports located in the same region.
