Fuel Surcharges: Another reason to buy local

My CFO friend does that sort of financial wizardry for a large international importer.

Last weekend, she told me she had been informed by her shipping vendors that the fuel surcharge on seagoing containers was going up at least 30%, to about $1200 for a large container.

That got me to thinking about a number of issues, so I started digging around.

The Westbound Transpacific Stabilization Agreement (WTSA) covers oceangoing freight in the Pacific in and out of the Oakland area. They recently announced a $600 per container increase, which is a brief resting place before Oct 1’s full “floating” charges take effect.

Up in Canada, the news is the same. The Canada Transpacific Stabilization Agreement (doesn’t that sound benign?) recently set their fuel surcharge at $1,260 for a 45 foot container.

There is similar news elsewhere in the industry.

A 45 foot container holds 3000 cubic feet of “stuff” (that’s 86 cubic meters for my overseas readers).

Let’s look at the impact of these fees on imported goods that your store might be selling or consuming.

Let’s say you have a 40″ big screen HDTV. Figure the box to be 2 feet thick, 4 feet tall and 5 feet long (all wild guesses). That’s 40 cubic feet, or about 75 TVs per container.

It might be more or less, but my box size guesstimate will probably be made up for by the space used by pallets and the like. The math isn’t the point.

If 75 televisions have to split that $1,260 fee, then each TV will go up about $20. Or should.

What will the increase be when it gets to you, the retailer? Do the math before you sign that contract.

If you sell imported cars, figure 4 cars per 40 foot container. That adds $315 per car to your cost, if you’re lucky.

It isn’t just ocean-going freight.

You need to be looking at this elsewhere. A simple example: Does a $1 Fedex or UPS fuel surcharge make sense on a 10 ounce overnight envelope? Call your Fedex/UPS sales rep and see what kind of flexibility they offer, if you do the kind of volume that would make this substantial to you.

My CFO friend tells me to expect some things to rise 30%, even though the fee increases don’t appear to reflect that size of increase in the cost of your goods. October’s increase will push you again.

It’s easy to watch this sort of news on CNN or MSNBC and think it doesn’t impact you – but it does. I suggest paying closer attention to it, particularly if you do a lot of international shipping. Maybe that’s another reason why Ian doesn’t buy Chinese.

On Monday, we’ll hit a lot closer to home on these fuel surcharges. And I might even make you mad.

In the meantime, take a long hard look at the kind of value you’re delivering now. Consider whether those increasing international shipping charges might just be better spent elsewhere – like on locally produced goods.

4 thoughts on “Fuel Surcharges: Another reason to buy local”

  1. I found myself sitting on my couch today, hearing about oil going up to a new record $137! Someone people ignorantly believe that if they drive economically, that they will effectively mitigate these rises. This post raises important concerns that often times people do not think about. Rising fuel prices can have huge ramifications across industries, trickling down to even the cost of smaller items. Thanks for the great post again!

    Tages last blog post..You reap what you sow!

  2. Oil is now up to $57 US a barrel! Considering that container shipping is normally the cheaper option when it comes to exporting and importing goods, when the price of oil is so high, it makes me shudder to imagine the prices of freight across other modes of transport such as air and rail.

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