Freight Rate Agreements are documents clearly defining the services in transporting freight. The agreement lays out key details such as shipment details, pickup and destination locations, services to be provided, and the agreed-upon payment amount. Additionally, it serves as a blueprint for the freight transportation process.
Different Types of Freight Rate Agreements
There are many documents and agreements in the transportation process. While there are some agreements specific to service agreements, there are also documents used in single shipment transactions. Knowing the difference in the different types of documents is essential in the transportation process.
Rate Confirmation
The rate confirmation, also referred to as rate con, acts as a confirmation agreement among the shipper, any third-party provider, and the carrier. This document clearly specifies the agreed-upon rates for the shipment. Before the pickup, all freight brokers must send rate confirmations to carriers. Should there be any changes to the rates, a carrier or broker can request to update the rate confirmation accordingly.
Load Tender
The Load Tender Agreement is sent to the carrier to officially confirm their acceptance of the load. In some cases, this agreement may serve as the rate confirmation as well. This document contains crucial information such as the rate, shipment specifics, pickup and delivery details, and other relevant details for the carrier’s reference. Upon receiving the tender, the carrier can then decide whether to accept or decline it.
Bill of Lading
The Bill of Lading (BOL) functions as a legal document and acts as the official receipt for the delivery of freight from a carrier to the consignee. The shipper hands the physical document to the carrier at pickup. Although the freight rate is typically not listed on the BOL, the document contains all necessary details and rate quotation numbers essential for coordinating transportation.
Broker Carrier Agreements
This agreement between the broker and carrier clearly outlines the responsibilities of each party in coordinating freight shipments. Additionally, it details specific duties, insurance verifications, and other essential documents necessary for routing freight together.
Types of Freight Rates
Typically, there are two main types of freight rates: spot rates and contract rates. Below is a brief description of each.
Spot Rates
A spot rate represents a one-time rate determined by factors like supply and demand in particular geographical markets. Shippers negotiate rates using load boards, considering factors such as pickup and destination zip codes and the prevailing buy rate for those areas. Negotiating rates also involves considering factors like dead-head miles, destination freight market, type of commodity shipped, required equipment, and other relevant details.
The benefit of using the spot market is the ability to find flexible transportation options to cover loads. However, the drawback is the need to thoroughly evaluate selected carriers and contend with market fluctuations caused by tighter capacities.
Contract Rates
A contract rate is a rate for a specific lane and volume of shipments. Contract rates are negotiated for a set duration or number of shipments. Typically, contract rates are on a per-mile basis for linehaul and fuel surcharges, with a varying rate for specific accessorial charges.
On one hand, the advantage of utilizing contract rates is the assurance of reliable capacity with a known carrier, offering consistent rates over a period of time or project. On the other hand, in recent years, contract rates have slightly exceeded spot rates due to market conditions.
Managing Freight Rate Agreements
Ensuring proper documentation and filing of freight rate agreements remains crucial. In today’s digital era, these documents are stored digitally for convenient access. Moving towards a digital landscape is a goal of the transportation industry in recent years.
While managing freight rate agreements is vital, it can feel overwhelming amidst other logistics activities. However, partnering with a Third-Party Freight broker simplifies the process. These brokers handle freight rate agreements daily and boast industry-leading technology to streamline operations.
ViewPoint TMS creates, stores, and retrieves all critical shipping documents for each shipment. Typically, shippers working with TLI only need to handle the Bill of Lading as TLI manages the rest. Collaborating with a top freight broker like TLI simplifies the management of freight rate agreements.