Fuel Surcharge : Prioritizing Transparency to Avoid Unpleasant Surprises
- 23 August 2019
- Martin Tremblay
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You are about to enter into an agreement with your freight carrier to ship your cargo from point A to point B for a negotiated and set fee. After exercising due diligence, you determine that the agreement is in order and you prepare to sign it.
Were you aware that the agreed-upon cost could increase by 30% to 45% based on a variable fee that is totally out of your control? Seems unfair, doesn’t it?
Although this situation may sound farfetched, it is nonetheless standard.
Fuel surcharge: Making sure you have an accurate picture of the situation
Introduced in early 2000, the fuel surcharge allows carriers to hedge against volatile diesel cost. Fluctuating from one week to another and based on the type of cargo being shipped (partial or total), this additional charge is determined according to a fuel index developed by the Freight Carrier Association of Canada (FCA), an independent pan-Canadian organization.
Although numerous factors need to be considered, a fuel surcharge generally increases transportation costs by:
15% to 20% for Less-Than-Truckload (LTL)
35% to 45% for Truckload (TL)
A surcharge at the discretion of carriers, despite established calculation tools
Although the fuel index is compiled and revised weekly by the FCA, it is not standardized, which means that carriers are not required to follow its model. Also, the carrier must decide if this surcharge is included in their proposed service rates or added to the invoice once transportation is complete.
This results in inconsistent carrier cost evaluations. It is therefore the client’s responsibility to understand and properly assess multiple quotes in order to compare fees and thus transport cargo at the best possible cost.
Honesty: A G.M.R. promise
Committed to transparency, G.M.R. works closely with a vast network of carriers to ensure that their fuel surcharge calculations reflect the FCA’s index. The result is unequivocal: our clients consistently benefit from thorough and competitive project evaluations that reflect the realities of today’s market without hiding unpleasant surprises.