Understanding LTL Freight Rates

Understanding LTL Freight Rates

Less-Than-Truckload (LTL) rates are used for shipments that are too big to be shipped as a parcel but too small to fill an entire truckload.

Typically, a driver starts off the day at their home terminal by loading several LTL shipments to be delivered in the morning. Once the driver’s trailer is empty, they will begin picking up shipments which are brought back to the home terminal for sorting. The shipments are then line hauled to the destination service centre for delivery the next day.

LTL rates are based on weight or skid space. Here are six key factors that determine LTL freight rates:

#1. Weight

LTL freight rates are based on the weight of the shipment, or the number of pallets it is shipped on. Weight-based rates are structured so that the more a shipment weighs the less you pay per hundred pounds. They are stated in dollars per hundred pounds (a.k.a. CWT or hundred weight).

Example of CWT Rate Scale:

LBS          $

MIN       $57.00 — MIN is the minimum rate charge for a small shipment.

LTL        $23.46 — The LTL break is the next level in the scale and is used for shipments that are less         than 500 lbs and more than the minimum amount.

500        $20.39 — The weight break, 500 lbs CWT is used for freight between 500 and 1000 lbs.

1000      $14.36 — The weight break, 1000 lbs CWT is used for freight between 1000 and 2000 lbs.

2000      $10.38 (the pattern continues)

5000      $6.80

10000    $4.59

20000    $3.44

  • To calculate a freight charge you must first determine which weight break to use based on your shipment weight.
  • Then you divide your total weight by 100 to get your number for ‘per hundred pound’.
  • Take this number and multiply it by the applicable CWT from the rate scale. Keep in mind that the smallest rate at the higher rate break applies if the rate is cheaper than the rate you just calculated.

Here is an example of a 4200 lbs shipment using the above rate scale. In this example the shipment would be invoiced using the 5000 lbs rate as it is less expensive than the 2000 lbs rate.

Calculation 1

(4200 lbs / 100) x 10.38 (2000 lbs rate) = $435.96

Calculation 2

(5000 lbs / 100) x 6.80 (5000 lbs rate) = $340.00

Here is another example in which a shipment would be invoiced using the actual weight break it falls under as it is less expensive than the weight break above.

Example 2:

Calculation 1

(625 lbs / 100) x 20.39 = $127.44

Calculation 2

(1000 lbs / 100) x 14.36 = $143.60  

#2. Density & Cube

A shipment’s density is one factor that determines LTL freight rates. Typically, CWT rates will use the highest number of the actual weight and the cube weight.

Cube weight is the total cubic feet of a shipment multiplied by 10 lbs. Cube is WIDTH X LENGTH X HEIGHT in inches divided by 1728.

So, a normal 40” X 48” X 48” pallet = 92165 cubic inches / 1728 x10 lbs = 533 lbs. That is the minimum weight used to calculate the freight rate for this pallet.

For larger shipments occupying 10’ or more of trailer space, or shipments of six or more skid spaces, a minimum of 800 lbs per linear feet applies.

Example:

A crate measuring 72” X 72” X 144” weighing 8000 lbs would be rated using 9600 lbs (144” / 12” X 800 lbs).

#3. Pallet rates

To simplify freight rates, pallet pricing was introduced. Pallet rates are based on the amount of skid spots used in a trailer. A regular pallet spot measures 48” X 48”. Like CWT rates, the more pallets you ship the more economical it is per pallet.

Example of pallet spot pricing:

1 skid     $114.00

2 skids   $151.00

3 skids   $196.00

4 skids   $229.00

And so on…

Larger pallets are rated based on the floor space they occupy. For example, a 48” wide by 72” long pallet will be rated as 2 pallets. A crate measuring 72”W X 96”L X 72”H will be rated as 4 skids as we cannot put any freight in the space left over between the crate and the wall of the trailer.

#4. Distance

Generally, the longer the distance between the shipper and consignee the higher the cost per pallet or hundred weight. Many LTL carriers will have several service centres in their area of coverage. Often locations closer to the service centres will have lower rates, even though the distance from origin is longer.

#5. Additional Services Required

Accessorial charges are the result of additional services performed by the carrier that go beyond the run of the mill dock to dock delivery. Examples of these charges are tailgate service, protect from freezing, additional waiting time, and private residence pickup or delivery. The accessorial charges are usually listed on the rate confirmation or as an Appendix to your rates.

#6. Fuel Surcharge

The fuel surcharge is a fee charged to cover the fluctuation in fuel prices. Typically, carriers set their rates based on a base cost of fuel of $.45 per litre. It is calculated as a percentage of base rate and is added to the invoice in a separate line item. The Freight Carriers Association (FCA) publishes weekly fuel surcharges rates which are used by most carriers.

For more information about LTL fees and services, contact Minimax Express.

By |2018-02-12T13:36:45+00:00March 1st, 2018|News|0 Comments