It’s a common practice for logistics providers to impose fuel surcharges to offset increasing fuel prices. While this is common for carriers who offer ocean and air freight services, this practice is also commonly adopted for inland transportation.
An Inland Fuel Surcharge (IFS) is a fee that is imposed by carriers for inland rail and road transport, in order to hedge against increasing fuel prices. Due to the volatility in diesel prices, carriers pass these costs on to their customers and are typically charged in a percentage or a fixed value in accordance with the increase.
In this article, we’ll be taking a closer look at how Inland Fuel Surcharges are calculated, how often carriers increase them and how their announcements are communicated.
How Is the Inland Fuel Surcharge Calculated?
Inland Fuel Surcharges are generally calculated as a percentage (%) or a fixed value ($) depending on current fuel price against a historic average. Carriers and transport providers impose and review the IFS increases at their discretion.
Most carriers will use the national average diesel price, in order to determine the fuel surcharge. They will typically look at the 52-week average fuel price and contrast this value to the US Energy Information Administration (EIA) quarterly average.
Carriers typically work with a baseline to assess an appropriate Inland Fuel Surcharge. Taking note of the diesel price difference, carriers will either increase or decrease the Inland Fuel Surcharge by a fixed value or a percentage.
How Often Is the Inland Fuel Surcharge Adjusted?
Some carriers may review the Inland Fuel Surcharge weekly, monthly, quarterly, or even yearly. Unfortunately, there is no standard or uniform calculation methodology or review time frame and is solely at the discretion of the respective carriers.
An Inland Fuel Surcharge may also not be adjusted on a regular basis. In fact, they are typically only adjusted if the current fuel price is experiencing an increase or decrease against the average fuel price over a previous period (typically a 52-week average).
How Is An Inland Fuel Surcharge Increase Announced?
Carriers typically inform their customers of an IFS increase via an announcement through their website or through email. The contents of these announcements are relatively simple.
They indicate the basis of increase, the Inland Fuel Surcharge amount and the implementation date. Below, you’ll find several examples:
|Carrier||Link to Announcement|
|Maersk||Maersk’s Fuel Surcharge Announcement|
|Hapag Lloyd||Hapag Lloyd Fuel Surcharge Announcement|
|Evergreen||Evergreen Fuel Surcharge Announcement|
|CMA||CMA Fuel Surcharge Announcement|
|Ocean Network Express||Ocean Network Express Fuel Surcharge Announcement|
Can An Inland Fuel Surcharge Be Avoided?
If a shipping line offers haulage services, the chances of avoiding an Inland Fuel Surcharge are almost impossible. This is because fuel prices fluctuate on a regular basis and fuel costs make up a large component of their overall operating costs.
It’s also important to note that carriers tend to maintain their inland transport rate and only adjust the Inland Fuel Surcharge, instead of having to adjust their entire transportation rate.
Only adjusting a single variable (the Inland Fuel Surcharge) makes it more transparent for their customers and also requires them not to revise the entire inland transportation rate sheet regularly.