In the Policies and Directives Pertaining to the National Motor Freight Classification (NMFC):
The density guidelines are used in the assignment of classes where the average density of a particular commodity or group of commodities is representative or reflective of the range of densities exhibited by that commodity or commodity group. The CCSB (Commodity Classification Standards Board) has established class 50 as the lowest class in the NMFC and class 500 as the highest.
The National Motor Freight Classification Procedures (NMFC) explains density as: Density – It has been well established that, absent any unusual or significant handling, stowability or liability characteristics, density is of prime importance in the assignment of classes.
Density pricing requires the shipper to declare a release value on the Bill of Lading at the time of shipment The new NMFC Release Value dollar amount for NMFC class rated shipments is now in effect. As a shipper you will pay more per hundred pounds for higher NMFC classifications and be typically offered a higher release valuation, (liability per hundred pounds) on the shipment. If you elect to lower the release value per pound the carrier may lower the cost per hundred pounds it charges.
The NMFC Procedures describes density and Liability (release valuation) as:
Density – It has been well established that, absent any unusual or significant handling, stowability or liability characteristics, density is of prime importance in the assignment of classes. The CCSB has developed density guidelines that are used in the assignment of classes.
Liability 1– The liability characteristic includes susceptibility to theft, liability to damage, propensity to damage other freight with which transported, perishability, hazardous nature, and value per pound. Value per pound provides a measure of carriers' potential liability, and the CCSB has established value guidelines to assist in the assignment of classes. Where the other liability elements are found to present no substantial problems or concerns, value per pound is of less significance. As with handling and stowability, unusual or significant liability characteristics may be a contributing factor in the assignment of classes.
Some carriers will cap their liability in their pricing tariffs (pricing agreement) and/or rules tariff. To simplify freight classifications, it is common to see a freight classification system called Freight All Kinds, or FAK. An FAK is a group of freight classifications which will rate and have a liability for a single class. For example, FAK 50 could be used for actual freight class 50 through actual freight class 100 ( 9 Density scales priced at the lowest Class 50) as specified in your pricing agreement and/or carriers’ rules tariff. Pricing and liability for shipments within this FAK range will be rated at the class 50 level or as specified in your pricing agreement and/or carriers’ rules tariff. The liability or release value will be at the class 50 dollar amount.
Freight Classes can vary within a commodity based on the density (weight per cubic foot) or value per pound or other factors i.e. shipping configuration. For example, the freight classification for paper clips can vary from class 60 to class 400 depending on the density. The density must be shown on the bill of lading at the time of shipment. If it is not on the bill of lading, the carrier has the right to bill you at the lowest density (Sub 1, or highest applicable freight classification cost per hundred pounds).This is known as the Inadvertence Clause in the NMFC rule under Item 170.
There is frequently a significant cost-savings opportunity because carriers pricing reflects the fact they are crosssubsidizing profitable and unprofitable lanes for any given customer. Essentially the carrier’s pricing reflects the need to rob Peter to pay Paul, so the shipper doesn’t get the best pricing nor does the carrier make an acceptable overall profit margin. One Discount and one Release Value and a FAK for all your book of business just simply does not work for you or
your carrier.
Discovering this opportunity, ask your carrier to: Jointly evaluate how the distributions of shipments by lane inbound and outbound release value could be re-aligned by tailoring shipments to each carrier's network strengths, thus lowering their cost to serve, and lowering the price to shipper.
Example of release value from UPS LTL current rules tariff;
In an effort to provide its customers with quality service at competitive rates, certain commodities may be offered to be
shipped at less than full value and UPS Freight encourages shippers to review this publication, as some items may be
subject to limitations of liability, released values or other options specific to a shipment or a commodity. All shippers are
further encouraged to evaluate their cargo insurance program so they may tender their goods at the lowest possible
overall cost while still being insured for a value consistent with their requirements
Bill Pugh (Formerly, Executive Director - National Motor Freight Traffic Association, Inc.) and Hank Mullen each have over
40 years of experience and are here to help. We’re fanatical about seeing you be successful. If you have any questions or
would like any more information, please give us a call at 770-380-1650 or 703-624-4240. EmailHank.Mullen@dynarates.com or
Bill.pugh@dynarates.com. We are located in Atlanta Georgia.
Density
The density guidelines are used in the assignment of classes where the average density of a particular commodity or group of commodities is representative or reflective of the range of densities exhibited by that commodity or commodity group. The CCSB (Commodity Classification Standards Board) has established class 50 as the lowest class in the NMFC and class 500 as the highest.
The National Motor Freight Classification Procedures (NMFC) explains density as: Density – It has been well established that, absent any unusual or significant handling, stowability or liability characteristics, density is of prime importance in the assignment of classes.
Density pricing requires the shipper to declare a release value on the Bill of Lading at the time of shipment The new NMFC Release Value dollar amount for NMFC class rated shipments is now in effect. As a shipper you will pay more per hundred pounds for higher NMFC classifications and be typically offered a higher release valuation, (liability per hundred pounds) on the shipment. If you elect to lower the release value per pound the carrier may lower the cost per hundred pounds it charges.
The NMFC Procedures describes density and Liability (release valuation) as:
Density – It has been well established that, absent any unusual or significant handling, stowability or liability characteristics, density is of prime importance in the assignment of classes. The CCSB has developed density guidelines that are used in the assignment of classes.
Liability 1– The liability characteristic includes susceptibility to theft, liability to damage, propensity to damage other freight with which transported, perishability, hazardous nature, and value per pound. Value per pound provides a measure of carriers' potential liability, and the CCSB has established value guidelines to assist in the assignment of classes. Where the other liability elements are found to present no substantial problems or concerns, value per pound is of less significance. As with handling and stowability, unusual or significant liability characteristics may be a contributing factor in the assignment of classes.
Some carriers will cap their liability in their pricing tariffs (pricing agreement) and/or rules tariff. To simplify freight classifications, it is common to see a freight classification system called Freight All Kinds, or FAK. An FAK is a group of freight classifications which will rate and have a liability for a single class. For example, FAK 50 could be used for actual freight class 50 through actual freight class 100 ( 9 Density scales priced at the lowest Class 50) as specified in your pricing agreement and/or carriers’ rules tariff. Pricing and liability for shipments within this FAK range will be rated at the class 50 level or as specified in your pricing agreement and/or carriers’ rules tariff. The liability or release value will be at the class 50 dollar amount.
Freight Classes can vary within a commodity based on the density (weight per cubic foot) or value per pound or other factors i.e. shipping configuration. For example, the freight classification for paper clips can vary from class 60 to class 400 depending on the density. The density must be shown on the bill of lading at the time of shipment. If it is not on the bill of lading, the carrier has the right to bill you at the lowest density (Sub 1, or highest applicable freight classification cost per hundred pounds).This is known as the Inadvertence Clause in the NMFC rule under Item 170.
Reviewing your Pricing and Rules tariffs and studying your historical shipping patterns, it will become apparent that your carrier’s lanes are not well-aligned with their network strengths, liability and cost to serve. The UPS Hundredweight and FedEx Multiweight shipments 500 pounds or less now have a new price-liability competitor.
There is frequently a significant cost-savings opportunity because carriers pricing reflects the fact they are crosssubsidizing profitable and unprofitable lanes for any given customer. Essentially the carrier’s pricing reflects the need to rob Peter to pay Paul, so the shipper doesn’t get the best pricing nor does the carrier make an acceptable overall profit margin. One Discount and one Release Value and a FAK for all your book of business just simply does not work for you or
your carrier.
Discovering this opportunity, ask your carrier to: Jointly evaluate how the distributions of shipments by lane inbound and outbound release value could be re-aligned by tailoring shipments to each carrier's network strengths, thus lowering their cost to serve, and lowering the price to shipper.
These operational efficiencies allowed the carriers to improve their discounts and maintain or improve the key service levels and contract terms. Carrier operation ratio (OR) improve, and your cost is reduced in many lanes.
Example of release value from UPS LTL current rules tariff;
In an effort to provide its customers with quality service at competitive rates, certain commodities may be offered to be
shipped at less than full value and UPS Freight encourages shippers to review this publication, as some items may be
subject to limitations of liability, released values or other options specific to a shipment or a commodity. All shippers are
further encouraged to evaluate their cargo insurance program so they may tender their goods at the lowest possible
overall cost while still being insured for a value consistent with their requirements
Bill Pugh (Formerly, Executive Director - National Motor Freight Traffic Association, Inc.) and Hank Mullen each have over
40 years of experience and are here to help. We’re fanatical about seeing you be successful. If you have any questions or
would like any more information, please give us a call at 770-380-1650 or 703-624-4240. EmailHank.Mullen@dynarates.com or
Bill.pugh@dynarates.com. We are located in Atlanta Georgia.
Density
