What are Freight Rebates

2007-11-5

The granting of a freight rebate to the shipper is not uncommon in the highly competitive transport industry. The grant can be legal or illegal.

The commission of the freight forwarder is about 2% to 5% in ocean freight and about 10% in air freight. It is legal for the forwarder in air freight to pay back the shipper portion of the commission it earns from the carrier, but such a payback may be deemed illegal in ocean freight. For example, if an airline quotes a freight rate of US$1,000 for a consignment and the commission of a forwarder is 10% (or US$100), the forwarder may quote the shipper US$950, the US$50 (or 5% of US$1,000) difference represents the payback by such forwarder.

In countries where exporters customarily deal directly with the shipping line in ocean freight instead of dealing with the forwarder, it is not surprising that most exporters prefer to deal with the forwarder in air freight instead of dealing directly with the airline, in order to take advantage of the payback.

Source: www.jctrans.net
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