Fuel Surcharge (FSC)

Definition

A Fuel Surcharge (FSC) is an adjustable fee added to the base transportation rate by a carrier. This fee is specifically designed to cover unexpected or regional variations in the cost of diesel, jet fuel, or bunker fuel. While most frequently observed in the trucking sector, FSCs are standard practice across ocean and air freight as well.

Core Function and Volatility

The primary function of the FSC is to insulate the carrier’s profit margins from the severe volatility of global fuel markets. Fuel constitutes a significant operational expense, and without the flexibility of an FSC, carriers would be forced to constantly update their base rate structures, leading to complexity and instability in pricing.

Billing and Calculation Methods

If an FSC is applicable, it will appear on your logistics quote or invoice, often classified as a destination charge. It may be bundled within the overall Pickup & Delivery (P&D) rate, or it may be itemized separately for transparency.

Calculation methods vary depending on the mode of transport:

• Trucking Fuel Surcharge: Typically calculated as a percentage of the base trucking cost. This percentage often correlates directly to an index of average national or regional diesel prices.

• Air Fuel Surcharge: Usually calculated based on the shipment’s chargeable weight.

• Ocean Fuel Surcharge: Often referred to as Bunker Adjustment Factor (BAF) and is calculated per container.

Expert Advice: Auditing FSCs

Shippers must actively audit and monitor FSC applications. Carriers typically utilize published indices or proprietary formulas to determine the FSC percentage. Always confirm the methodology and the index used by your carrier to ensure accurate billing and to manage total landed costs effectively.