FAK rate in shipping is the rate applied to all freight categories to build a standard pricing structure. Exporters transporting their goods across borders for international trade book a shipping company or carrier to carry out the intermodal transportation of goods using various modes of transportation such as rail, road, air and sea. These shipping companies or carriers charge a shipping rate depending on various factors, including cargo specifications and distance travelled. Different types of cargo are charged according to their weight, volume, number, and handling complexities. Since many shippers ship various goods that may have differing specifications, it is complex to calculate shipping rates. FAK rate was introduced to standardize the shipment of different cargo categories.  

What is the FAK rate in logistics? 

In the shipping industry, FAK stands for “freight of all kinds,” which defines a shipping rate applied to all goods regardless of their category or freight class. Under this type of flat-rate shipping pricing, shipments with multiple commodities are charged a single rate. This single rate, termed an FAK rate, is negotiable, and the shipper and carrier agree on the shipping rate based on factors, including the average density of the shipment and the size of the freight container. FAK rates benefit shippers who frequently transport various goods, eliminating the need to classify and charge each item separately. So, shippers willing to use a simplified, cost-effective shipping solution choose FAK shipping rates. Freight forwarders and NVOCC (non-vessel operating common carriers) use FAK rates to offer economical shipping solutions to the shippers. 

How is the FAK rate calculated? 

Shippers and carriers can negotiate the FAK prices in shipping to reach an expected rate suitable to both shipping parties since the cargo category is significant. The freight prices are calculated through FAK pricing, which depends on various factors. 

1. Volume of the goods – In most cases, the average volume of the overall shipments is considered. Shippers who transport more significant volumes of cargo negotiate the FAK rates based on the volume instead of depending on the weight of the goods. If a particular good has a high volume and requires significant space, the shipper may incur a high FAK rate. Similarly, shippers may negotiate a low FAK rate if the volume of goods is suitable for different items to be packed in the same pallet or crate.  
2. Shipping lanes – While some charge higher rates, others charge considerably lower prices. Navigating through the most used shipping lanes, closer to major trading ports, will cost more than navigating through less traffic-laden routes and lanes not used by significant global trade businesses. 
3. Shipping carriers – Different shipping carriers also charge differently. NVOCC does not own vessels and is likely to charge based on container size, type, and shipping lane. Shipping companies that own the vessel may charge differently.  

Type of shipping container – Shipping containers such as 20ft and 40ft standard containers, high cube containers, reefer containers, and tank containers are most commonly used in shipping. Thus, they are likely to be charged less than the transportation of goods in other types of containers.  

5. Market conditions – FAK rates also depend upon fluctuating market conditions. The rise in fuel prices, shipping season, and additional safety measures for specialized goods add up to the overall FAK charge in shipping. Market conditions also make it challenging for exporters to negotiate a better amount.  

Benefits of FAK rates in shipping 

The advantages of FAK rates in shipping extend to both the shipper and the carrier. These are the reasons for choosing the FAK rate in shipping. 

1. Simplified pricing—Calculating freight rates for complex shipments of varied categories can often be challenging. FAK rates in shipping allow carriers to narrow and simplify the pricing structure for shippers by offering a single flat rate for a range of commodities. The simplification of the freight rates helps in efficiently managing and understanding billing.  
2. Flexibility—FAK rates are the simplest solution for exporters wanting flexibility while dealing with a diverse range of goods. In regular freight pricing, exporters need to negotiate separate rates for different types of cargo. The FAK rate is comprehensive and offers flexibility that is particularly beneficial for exporters dealing in international trade with a mixture of goods. 
3. Cost savings—Instead of spending large amounts on goods of high volume and specialized type, exporters can negotiate a single and comprehensive rate for the entire shipment. This helps reduce costs and creates a more efficient billing process.  
4. Efficiency – The simplification offered by FAK rates saves the shippers from spending extra time and indulging in the complexities of dealing with multiple specific rates for different types of cargo. This increases operational efficiency as the shippers can focus on managing their supply chain and logistics operations without the hassle of billing and invoicing.   

When not to consider FAK rates in shipping? 

1. Shipments belong to the lower class– If the shipment being transported can be mainly categorized into low-class freight, there is no need for an FAK rate negotiation as the freight rate would not change much. In the case of LTL (less than truckload load) shipments, freight classification is required; the lower the class, the lower the freight rate. 
2. Transporting high-volume goods—The FAK rates are based on the average of all high-volume shipments. In case of cargo damage, cargo insurance claims for high-value shipments will not yield their complete value due to the FAK classification of goods. Shippers will only receive protection of the freight class being paid. 
3. Using a TMS– A transport management system eliminates the need for FAK rate in shipping as the TMS can dynamically price all sorts and freight categories in a mixed shipment.  

Tips for reducing costs in FAK rate in shipping 

1. Shippers must negotiate effectively. A high shipping volume Favours negotiating lower FAK rates in logistics. Frequent transport of a large volume of goods and good trade relations with the shipping carrier contribute to higher chances of negotiation. 
2. Building long-term trade relationships with carriers helps shippers get more discounts and favorable FAK rates in transportation. 
3. Packing the goods optimally helps maximize cargo density and minimize space wastage, lowering the FAK cost. 
4. Shippers must consider the market conditions and peak seasons and avoid shipping in these conditions. Increased fuel prices, labor costs, and other geopolitical events in the supply chain can significantly impact the FAK rate. 
5. Cargo consolidation helps optimize cargo size and routes and connects multiple shipments for transportation. It can also lead to lower FAK rates as multiple shippers pay for placing the shipment in a single container for LCL (less than container load) shipments.  

These are a few ways shippers can negotiate their shipments for low FAK rate for transportation and ensure cargo security. 

LOTUS Containers sells and leases shipping containers to cater to the global export and import demand of shippers across the globe. We offer new and used shipping containers based on the shipper’s cargo requirements.