Learning how to reduce freight costs is a key part of keeping a business budget manageable. It plays a part in increasing profits and reducing production costs. Initially, these benefits may be obtained with relative ease. However, as time goes on, new business objectives are established and must be met. For this reason, finding ways to keep freight costs down is often a challenge.
The International Transport Forum (ITF) states that the best ways to reduce international freight costs include:
In our comprehensive guide, we review proven strategies for reducing international and domestic freight costs. For each method, we give detailed examples of how to execute the given task, along with when it’s likely to result in lower costs.
A key area in which freight costs can be reduced is in your choice of transportation and storage facilities. Many options are available in most cases, and it comes down to selecting the one that offers the best compromise between quality and cost.
However, choosing the most cost-effective option or combination of options is the real challenge. Time-sensitive deadlines, geography, product dimensions, and more all factor into making the best choice.
Before you can evaluate alternative options for transportation and warehousing, it’s important to have a firm understanding of your current logistics structure. Basically, this is the complete supply chain for your products.
Understanding the full supply chain journey of your products includes finding out:
Each of these details can be compared to alternative choices in the supply chain journey. This is where potential cost reductions will start to be realized. With that being said, some alternatives that seem more expensive at the onset may actually be more cost-effective when looked at long-term. Because of this, it’s important to keep an open mind during this phase.
In theory, the shortest, most direct path for products to travel should be the most affordable. However, this isn’t always the case. Surprisingly, taking a longer and less direct path may actually reduce costs in some cases
Some of the surprising factors that can lead to reduced costs by utilizing longer, indirect paths include:
Each of these factors have unique characteristics that need to be considered when organizing the logistics of a shipment.
One of the bigger factors increasing costs for international freight is congestion at major ports of entry. The COVID-19 pandemic had a ripple effect on the shipping and logistics industries, especially in terms of port congestion.
Crowding at hub ports like Long Beach and Los Angeles caused major delays for all parties involved. While congestion has drastically improved since hitting its low point in the first quarter of 2022, issues still flare up. Now, many shipping companies account for any delays caused by congestion by increasing prices for shipments arriving at ports most likely to experience it.
Solution: Talk with your carrier about moving goods through a less crowded port of entry. Depending on the pricing model of some carriers, this can reduce your total freight costs for a given shipment. If you don’t have a preferred alternate port of entry, they should be able to recommend some options to meet your specific needs.
On the warehousing and order fulfillment side of things, the cost of commercial real estate and warehousing can have an impact on your supply chain costs.
Simply put, as rent and land prices for warehouses and commercial structures rise, services provided through them will also rise.
This is a common practice across all commercial real estate. Higher overhead costs mean customers – in this case users of the warehouse and its fulfillment services – are often hit with higher service and product fees.
Solution: Use a warehouse in a more rural area. Warehouse costs are often lower in remote areas, which means these savings could be passed on to you. Even if this means your products travel a bit farther to reach the warehouse, the cost savings are often justified.
According to trucking.org, there are over 900,000 carriers operating in the United States. That’s numerous similar businesses working to earn and keep customers like you. Depending on what resources they have available, their location, and their range of operation, you may find alternative carriers who can offer substantial savings.
For example, a carrier with limited trucks available in your shipping area might have higher rates due to a lack of resources. On the flip side, one with numerous trucks available in your area is likely to charge less for the same shipment.
The same concept applies to other logistics resources, including:
Solution: In the process of trying to reduce costs, ask your carrier if there are other resources available. It might be cheaper to have your goods transported and stored through an indirect path. This can be due to your partner having sufficient resources to meet your needs in other areas.
Fuel costs vary from one area to another, which can have a noticeable impact on shipping costs. Similar to overhead costs for warehouse space, when fuel prices are higher, the cost is passed on to you. California is one of the most notable examples of this.
As of March 18, 2024, the cost of a gallon of diesel fuel in California was approximately $5.20. In contrast, prices on the gulf coast are approximately $3.75 per gallon as of the same date.
Solution: Explore the possibility of routing your products through an area with lower fuel prices. Even though your products may travel a longer distance, the reduced fuel costs can work in your favor. While it may be impossible to avoid certain areas entirely, there is still a chance for some savings.
Another way you may reduce costs is by reviewing the shipping method(s) used to transport your goods. Coming from overseas, your options are limited to air or ocean. However, you can choose between road, rail, and air for shipments in the USA, Canada, and Mexico.
Making the best decision means taking into account the various factors playing a role in the overall costs for your shipment.
You should consider all of these elements when deciding on the best mode of transportation for a given shipment. For example, it’s typically cost-effective for large, heavy shipments travelling long distances to be shipped by rail or truck. However, the limitations for shipping dimensions are stricter. Likewise, lighter shipments that are easy to handle and stow are best suited to air shipping, while large shipments that can’t reach their destination via rail will be best suited to truck freight.
Choosing the wrong mode of transportation for one shipment won’t break the bank. With frequent and regular shipments, though, losses can add up quickly and should be avoided.
You don’t need to be an expert in any of these areas or do hours of research to reduce your costs. An experienced carrier should be able to review these factors to determine how to make your supply chain more cost-effective.
Our licensed customs brokers work hand-in-hand with our freight forwarding team to help reduce your international freight costs without sacrificing quality or putting your products in jeopardy.
If you work with foreign suppliers, you should review the shipping terms that are currently in place with your foreign suppliers. This is often the quickest way to find an opportunity to reduce costs.
While the phrase “shipping terms” is used broadly for all types of shipping, on an international scale, Incoterms® (short for international commercial terms) are an industry accepted standard used in business contracts. They consist of 11 specific terms of sale designations and agreements used to define the responsibilities of the buyers and sellers involved.
The 11 specific terms of sale used in Incoterms® 2023 are listed below:
Each designation listed above outlines which party (buyer, seller, freight forwarder, etc.) is responsible for the various tasks and costs for logistics-related activities pertaining to a given shipment.
To find the Incoterms® that have been used on your previous imports, you’ll want to take a look at past Commercial Invoices and/or Bills of Lading (BOL).
The majority of commercial invoices and BOL’s will include the associated Incoterms® for an imported shipment. Most commercial invoices and BOL’s will include a separate line item that specifies Incoterms®/Terms of Sale.
There’s no mandated format for either one of these documents, so the location of this information can vary. If you have previous documents, but can’t locate the Incoterms®, our licensed customs brokers can assist you.
The answer to this question isn’t definitive, as there simply isn’t a “best” Incoterms® rule that should be used in all cases. Every import transaction should be examined individually to determine which Incoterm® rule is ideal. Knowing the terms that have been used for your previous import shipment(s) is the right place to start.
Once you’ve located and identified the Incoterms® rules from past commercial invoices or BOL’s, you’ll be able to analyze them. Each Incoterm® rule’s unique characteristics will typically lead to a specific path towards reducing costs.
While the title of this article specifically mentions reducing freight costs, the cost reduction can often come from other areas not related to freight. Even more surprising, it’s often possible to reduce total costs by taking on more responsibility in the supply chain.
One of the most common methods for reducing international freight costs is to switch to an Incoterm® rule that gives you more control over the supply chain process. Each rule varies in terms of how much control over the supply chain is given and who it’s given to (either the buyer or seller).
If you’re a buyer and your past import shipments use any of the following rules below, there’s a good opportunity for you to gain more control over the supply chain and reduce costs:
Each of the Incoterms® above dictate that the seller of the goods cover the majority of costs associated with an import shipment. Along with covering the costs, the seller is also responsible for arranging most of the necessary logistics resources, but this varies for each rule.
For example, shipments arranged under the DDP (Delivered Duty Paid) rule have the import clearance being handled by the seller. The others on the list have this task assigned to the buyer.
While these offer convenience to the seller, it often comes at the expense of cost. This is because sellers control the process and can charge more than what you’re comfortable with. Some sellers even increase the cost of a product based on specific Incoterms®. It’s also not uncommon for sellers to provide just one option during the negotiation process.
The negotiation process will vary based on the specific details of your situation. Some purchase orders are based on ongoing volume contracts and have specific conditions in terms of changing the agreement. Others aren’t as strict and can be more easily adjusted.
When negotiating the shipping terms, you can ask for a revised quote given the new desired terms. Some suppliers even offer multiple quotes for more than one rule when requested.
As noted earlier, there isn’t a sole choice in terms of which Incoterm® you should switch to if you decide to negotiate. Each situation is unique, and you should conduct an appropriate amount of research, including choosing a freight forwarder, before making a decision.
The suppliers are an important part of the supply chain puzzle. Many businesses agree to purchase goods from a supplier only based on the initial purchase price and don’t consider outside factors, such as shipping.
One easy opportunity to save money comes from the practice of nearshoring. For businesses who source goods from overseas, this option is worth consideration.
Nearshoring is often a more cost-effective alternative to importing goods from overseas. This practice involves sourcing products from a nearby country, as opposed to one that’s far away. For U.S. importers, this option is even more attractive due to trade incentives, as well as other useful benefits.
The United States Mexico Canada Agreement (USMCA), which replaced NAFTA, grants nearly every product traded between the three countries duty-free status. This benefit alone is often enough to offset any additional costs and make people feel better about switching from suppliers in places like China.
In addition to duty-free trade on nearly every product imported from Canada and Mexico, other trade benefits include:
Each one of the above benefits can hold significant value for your business. Below, we’ll examine each benefit to understand how it presents an opportunity for reduced international freight costs.
The proximity of the U.S. to Canada and Mexico offers several cost-saving opportunities. The shorter distance that your products have to travel can lead to reduced transportation costs as well as lead times right away. As we noted in the previous section, transportation costs aren’t only calculated based on the distance traveled. However, it is still one of the main elements that determine costs.
Additionally, all three countries are connected by land, which opens the doors for other, more affordable modes of transportation. Goods can be shipped via truck or rail between the three countries, rather than being limited to ocean or air coming from overseas.
Interestingly, shared or similar time zones can be a component leading to reduced costs. On the surface, being closer in time to a foreign supplier might simply seem like a convenience and not a means of reducing costs. However, situations can arise during the course of an international shipment where quick communication is a must.
While importing into the U.S. can be trouble-free, especially for experienced importers, CBP and other government agencies sometimes require additional information in order to clear a shipment. Many times, the information that’s needed is with the foreign supplier.
If your supplier is in China, India, or another country in a completely different time zone, the response may not be instant. This can lead to delays in your shipment being cleared, resulting in excess storage fees.
When working with a supplier in Canada, Mexico, or even in South American countries, you have a better chance at communicating in real time. While this benefit might not lead to consistent cost savings, avoiding costly and unexpected fees is a plus.
Another indirect cost-savings benefit of nearshoring comes from shared cultural elements. While each country has a unique and distinct culture, there are a number of shared elements that Canada, Mexico, and the U.S. have that lead to positive results when it comes to the international supply chain.
Some of the shared cultural elements between Canada, Mexico, and the U.S. include:
From the list above, shared languages is undoubtedly the one with the greatest positive impact on trade. English, Spanish, and French are the most common languages across the three nations and finding native speakers for cross border activities is much easier.
Communication is key when conducting international business. Ensuring that there’s a common understanding regarding details related to manufacturing, shipping, and more is key to avoiding costly mistakes.
Trade relations between the U.S. and China took a turn for the worse in 2018. This wasn’t the first instance of trade instability between the two nations. In fact, the U.S. and China only renewed trade relations in 1979 after years of prior issues revolving around numerous topics. Based on the previous rocky history between the two nations, there’s no guarantee things will improve.
On the other hand, trade relations between Mexico, Canada, and the U.S. have been stable for quite some time, and show no signs of souring. In the following table, you can see how much Canada and Mexico spent on imports from the USA in 2022.
| Country | Total Value of Imports From USA |
| Canada | $356.5 billion |
| Mexico | $324.3 billion |
If your business was hit hard by the Section 301 tariffs, it may be time to consider the more stable alternative of sourcing goods from Mexico and/or Canada.
Mexico and Canada aren’t the only nations where you’ll be able to benefit from free trade. The U.S. actually has 14 free trade agreements in place that cover international trade with 20 countries; some agreements like USMCA cover multiple countries.
The 20 countries that are covered under free trade agreements are listed below:
Whether the free trade will be enough of a cost reduction to justify switching suppliers will need to be figured out.
In the second section of this article, we touched on the impact that carrier resources have on your total costs. This topic deserves some additional explanation, specifically regarding dedicated freight lanes.
A dedicated freight lane – sometimes just referred to as a dedicated lane – is a specific, repeatable route that a carrier completes on a regular basis. Some carriers and freight forwarders operate dedicated lanes, while others don’t.
These lanes are usually accompanied by an exclusive contract between a carrier and shipper based on a predetermined shipping schedule and capacity. These exclusive contracts typically include reduced pricing for the shipper.
The key to getting a dedicated freight lane is to have consistent, regularly scheduled shipments. This one detail determines whether a carrier will allocate the resources necessary to operate a specific lane.
Be aware that some carriers/partners will require that you ship a minimum number of loads in order to qualify for dedicated lane pricing and availability. If you don’t meet this minimum, you’ll likely end up paying a higher rate.
Our team can help you determine if you might be a good candidate for a dedicated lane. We work alongside our capacity procurement team to ensure that we have the resources to meet your supply chain needs. Reach out to our experts today to see how we can improve upon your existing supply chain structure.
To say there’s significant paperwork involved in freight shipping is an understatement. This is especially true of imported goods. There are numerous individual documents, each containing specific details regarding the shipment.
The details that are included within the documentation also come from multiple sources including the shipper, carrier, freight forwarder (if applicable), and more. All of these factors lead to opportunities for costly mistakes to occur in the importing process.
It’s not uncommon for mistakes to be found on standard freight and import documents, especially the commercial invoice.
In CBP’s publication, Importing into the United States A Guide for Commercial Importers, outlines common commercial invoice mistakes and their common causes.
Any one of the mistakes listed above can lead to a direct cost error that, once fixed, can lead to savings for you. For example, if an incorrect higher value is listed on a commercial invoice and accepted during the import process, total duty paid will end up being more.
The mistakes above also have the potential to cause delays in your shipment clearing customs. These delays can sometimes lead to unexpected fees or slowdowns in your domestic supply chain, which may indirectly increase your costs.
The other common form that can lead to costly mistakes is CBP Form 7501, also known as the entry summary. If you’re working with a customs broker, they’ll submit this form on your behalf. Mistakes are more likely to occur if you refuse to use a brokerage service or trained professional.
One of the most common mistakes made on the Entry Summary is an incorrect HTSUS tariff classification. This is the key detail used by CBP agents to determine the rate of duty that should be charged at the time of import.
Having an incorrect tariff classification for your product(s) on the entry summary can have multiple consequences:
An example of #4 on the list above is almonds. Almonds have five different HTS codes that can apply to them. The rate of duty between the 5 codes is 7.7¢ per kilogram to 32.6 ¢ per kilogram. For large shipments, this variance can lead to a difference of thousands of dollars in import duty.
One of the most important tasks of a customs broker is ensuring your imported products are classified with the correct product codes. If your customs broker isn’t asking you specific questions about the products you’re importing before completing required customs documentation, this could be a red flag.
Reducing domestic and international freight costs can be overwhelming and complex. The process is made much simpler by partnering with an experienced and knowledgeable logistics partner. That’s where we come in.
At USA Truckload Shipping, we take time to carefully review and evaluate your current supply chain to identify opportunities to reduce costs. At the same time, we ensure that reduced costs don’t lead to reduced quality. Through our established network of carrier and warehouse partners, you’ll experience a cost-effective and high-quality supply chain.
Our full list of services includes:
Reach out to our team today online or at (866) 353-7178 to take the next steps toward reducing your freight costs.
R+L Global Logistics
315 NE 14th St., Ocala, FL 34470
