Fuel surcharge (FSC)

Contract freight rates are set for a year; diesel changes every week. The fuel surcharge lets the base rate stand while fuel floats. The usual formula: for every increment the DOE average diesel price rises above a base (say $1.25 per gallon), the surcharge rises by a fixed amount per mile, derived from an assumed fuel economy of about six miles per gallon. Diesel at $4.00 with a $1.25 base is $2.75 above base; at 6 mpg that is roughly $0.46 per mile.

Spot rates usually quote all-in, fuel included, which is why a spot rate and a contract linehaul rate are not comparable until the surcharge is added to the contract number.

Where the surcharge causes work: the carrier’s invoice states the surcharge the carrier applied, the shipper’s contract states the surcharge the shipper will pay, and the two use different bases, different indexes or different weeks. An audit of carrier invoices against rate confirmations catches surcharge errors more often than linehaul errors, because linehaul is a single negotiated number and the surcharge is a calculation that two parties do separately.

On a rate confirmation, the cleanest practice is to state the total the carrier will be paid and note whether it includes fuel; a rate written as “$2,450 + FSC” invites the argument.