There’s something to be said about – “staying classy!” And these words even apply to freight. “I don’t know how to put this but [freight’s] kind of a big deal.” Classifying freight is one way to stay classy in transportation.
What is freight classification? How is freight classified?
Carriers and brokers provide multiple options to move freight for shippers, such as full truckload, less-than-truckload, and partial load transportation services. Learn more about the distinctions of each shipping option on Soshaul’s blog. Each option has pros and cons, but particularly in the LTL world the overall rate is determined largely by freight classification.
Freight classification is a structure for pricing, developed by the National Motor Freight Traffic Association (NMFTA), which helps carriers determine the cost of moving freight. Classification standards are updated multiple times a year to ensure shippers, carriers, and brokers can easily identify what is being shipped and how to determine rates accordingly.
“I wanna say something. I’m gonna put this out there: if you like it, you can take it. If you don’t, send it right back….” – Freight Broker (pickup line said to the carrier with the right equipment to make delivery)
Here it goes. Freight Class is a numeric label from a ranking system that indicates the “transportability” of a commodity. The intent here is to help establish and maintain standardized freight pricing. Freight Classification is based on four major classifying factors (aka cost-drivers) detailed below:
Freight Density. This factor considers the weight and the amount of space on a trailer that will be taken by the shipment. Freight density is the weight of the shipment relative to the size or dimensions of the shipment. It’s the amount of weight in a given amount of space. A shipment that is low in density will have a higher classification, while a shipment that is high in density will have a lower classification. Truck drivers tend to prefer their trucks to be full, in terms of both weight and space, so utilizing more of the equipment will be advantageous.
Handling. This factor considers how difficult the freight is to handle and transport. If special handling is required, this can change the freight classification and impact the rate that the carrier will charge to transport the load.
Stowability. The size, shape, and fit of the shipment in the trailer space will have an overall impact on the freight classification.
Liability. If freight has specifications that need to be followed because the freight can be easily damaged, or requires refrigeration, for example, the freight classification can change. Liability includes the value or worth of the product needing to be shipped in the unlikely event that it were to be damaged or lost. More valuable freight will have higher rates, and less valuable freight will be less expensive to transport.
A lower class number means a lower rate, and a higher-class number generally indicates a higher rate will be assessed. Lower class numbers will have lower costs per pound to ship than higher freight classes.
There are 18 different freight classifications ranging from Class 50 to Class 500. The figure below gives some quick examples of each Freight Class and the types of commodities moved in each.
Why do freight classifications matter?
Freight classifications help carriers, specifically, LTL carriers, understand how easy or difficult it will be to transport freight. This is important for LTL carriers because they may have to pack and unpack different types of freight multiple times at different stops as they complete their pick-ups and deliveries. With LTL shipments, shippers are paying for space on a trailer based on the freight classification to help the carrier properly identify how the freight will fit on their truck and be safely and economically transported.
Freight classifications are less common with full truckload shipments because the shipper is typically paying for the entire space (i.e., trailer or container) rather than a portion of space. Factors such as commodity value, size of the shipment, and distance the FTL freight needs to be moved will impact the rate, but carriers don’t have to worry about dedicating space to multiple shipments as with LTL shipments.
NOTE: All commodities have both a freight class as well as a specified code from the National Motor Freight Classification (NMFC). The NMFC code is different than the freight class because it explicitly details the freight more than a freight class. For instance, food items and car parts both have a freight class of 60 in the above graphic. The NMFC code of each of these commodities, however, will be different from each other, distinguishing the goods.
Freight Classification Tools
There are plenty of resources on the internet to narrow down freight classifications and/or NMFC codes. Here are a few resources that are popular to use:
NMFC codes are a bit harder to track down. The NMFTA manages the NMFC standards and offers NMFC book resources for purchase to look up commodity codes. They also offer software called ClassIT that searches and identifies NMFC codes. Watch this short video for a demonstration. It can be purchased here. As a carrier, you may not need to identify these classifications often. Lookup duty is typically the shipper’s responsibility. Although, larger LTL carriers will audit freight classifications as needed.
What are Dimensional Ratings (aka Dimensional Weight or Dim Weight)?
An LTL Carrier will usually price the freight based on the weight and cube of the items in the shipment. So, the Dimensional Rating factors in the length, width, and height (i.e. cube or cubic ft) of a shipment as well as its weight. Density is the primary driver here. However, the characteristics listed above can have an effect on the class, adjustments can be made based on handling, stowability, and liability, and in turn, impact cost. Typically, lower freight classes represent items of higher density and therefore a lower cost to ship on a per pound or per cubic foot basis. This approach has already been adopted by a number of major carriers and is expected to continue to be adopted by others in the industry.
It's important to note that the type of freight being hauled will determine the equipment that is needed to complete the job safely and securely. The type of vehicle and equipment a new driver expects to operate determines the CDL Class or CDL Endorsement that the driver will need to obtain.
For all of us here at Soshaul Logistics, including Anchorman Ron Burgundy, “You stay classy, San Diego.”
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.