Freight can be the cost of transportation of goods or can be goods or cargos carried by ship, plane, truck, or train. Freight is a commodity if it means goods. Freight is not a commodity if it means the service fee paid for transportation.
What is the definition of freight?
There are 2 definitions of freight depending on how you use it. Freight can be the service fee you paid for the transportation of goods. Freight can also be the goods or cargo carried by ship, plane, truck, or train.
What are commodities?
Merriam-webster.com indicates that commodity is an economic good.
www.investopedia.com emphasized that a commodity is a basic good used as an input in the production of goods and services. No processed value can add to a commodity.
What are the types of commodities?
Personally, I put commodities in 2 broad categories
- Raw material
- Agriculture: Wheat, cotton, corn, and sugar are all commodities
- Energy: crude oil and natural gas are also commodities
- Metals: Gold and silver are commodities
- Financial product
- Currency or money is a commodity
- Bitcoin-Virtual currency is a commodity too
What commodities are considered general freight?
The commodities that can transport under standard conditions are general freight.
For example that both grain and sand are general freight. they can be transported in bulk under normal temperatures.
Crude oil and natural gas are not general freight. Crude oil needs a tank to transport. Natural gas needs liquified before we can transport it, so they are not general freight.
Is trucking a commodity?
Trucking is not a commodity. Trucking is a truck service provided to move goods from one place to another.
Is ocean freight a commodity?
It depends on what kind of freight the ship carried.
Below is a list of the top 7 commodities that shipped by ocean
- Petroleum and related products
- Metals
- Minerals
- Animal/vegetable oils
- Chemicals
- Lumber
- Agricultural commodities
Commodity Vs. Goods
Commodity
Most of the commodities are natural resources, such as metals, mineral products, crude oil, etc.
Goods
Most goods are produced from commodities.
Typical goods are consumer products. Such as cars build on commodities of iron, steel, and plastic.
Are shipping containers a commodity?
Shipping containers are not commodities, but the raw material used to produce shipping containers such as iron, steel, and aluminum are all commodities.
What type of business is freight?
There are many businesses related to freight, such as trucking, warehousing, freight broker, ocean carrier, commercial flight etc.
Trucking
Trucking is very popular and request small capital to start it. You can start your trucking service with just one truck.
Warehousing
warehousing is an inevitable part of logistics. Many freight needs to be stored in a warehouse before being moved to the final destination. if you have space with easy access to a truck then you can provide warehousing service.
Freight broker
If you are a licensed freight broker, you can help either shipper or buyer to clear customs, pay tax, get cargo from the border, etc.
Ocean carrier
It is not easy to break the barrier to be an ocean carrier. Even the smallest ocean carrier needs millions or billions of funds to purchase ships. You are less competitive in ocean freight if you own fewer ships because you have fewer lanes to let customers choose.
The top 4 major ocean carriers are Mediterranean Shipping company, Hapag-Lloyd, CMA-CGM, and Maersk.
For example, Mediterranean shipping company owns over 100 vessels, and its revenue in 2015 is roughly 28 billion.
Commercial flight
It is also difficult to be qualified as a commercial flight to move freight by air. It Is not only the plane expensive but also the ground service at different airports globally costs very high.
If you pick up a cargo from Paris and fly to Chicago, you need to have teams in pairs to process the documents, load the plane, and teams to process documents, and unload the plane.
What are freight companies called?
Most freight companies are called freight forwarders. A freight forwarder can help you book the vessel, clear customs, pick up cargo, or deliver the cargo. of course, freight forwarders will charge you for each of their services.
3 worldwide famous freight forwarders are DHL, UPS, and FedEx. They operate in many countries and move freight globally.
Is freight an asset or expense?
If you refer to freight as goods you purchased then it is an asset, the freight is your inventory.
If you refer to freight as the transportation cost you paid to the freight forwarder then it is an expense.
What is freight in?
Freight in is the transportation cost to bring the goods to your place.
It depends on your incoterm with suppliers, sometimes shipper covers the transportation cost, and sometimes buyers do.
Below is a good video explaining freight cost
What is freight out?
Freight out is the transportation cost to deliver the goods to customers.
If customers pay the transportation fee then freight out is revenue for you.
If you bear the transportation cost then freight out is an expense ( or cost of goods sold) for you.
