The Meaning of Freight Charges

Unseen costs of retail.

In order to be sold at a retail store, merchandise must be shipped from a manufacturer to a warehouse. Then, when a store wishes to stock an item, it has to be shipped from the warehouse to the store. Freight charges are the cost of moving the merchandise.

In-House

Some retailers want to control how goods are shipped to them. According to Bloomberg Businessweek, Wal-Mart would like to move into the trucking business. While this would be a good move for diversification, it would also allow Wal-Mart to control and lessen freight charges.

Subcontractor

Not every business has the clout of Wal-Mart, which controls its own trucking and warehousing operations. Many businesses have to sub-contract moving freight to a third party carrier. Companies like FedEx, UPS and DHL have their own schedules of how to calculate freight charges.

International

In a global economy, retail goods are often manufactured overseas in places like China. So, freight charges can accrue as goods are trucked to a port, packed onto a cargo vessel, and shipped, literally, across the ocean. The receiving port must unload the vessel, where the merchandise is trucked. This makes shipping a matter of importing and exporting.

References

• Bloomberg Businessweek: Why Wal-Mart Wants to Take the Drivers Seat
• International Trade Administration: US Export Fact Sheet
• Department of Homeland Security Proper Freight Charges Required

Resources

• Department of Commerce: Frequently Asked Questions