Fuel Surcharge

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Bulldog5221

New Member
Aug 9, 2011
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Hello everyone !
This not directed at any one trucking company that is brokering loads, but there are many out there who are guilty of this. I`m referring to the old keep all or most of the fuel surcharge instead of paying it to the one who is actually paying for the fuel.
The way I found out how much they were keeping was when I stumbled across a Website for the company who actually was the shipper of my load and lo and behold there was a link on the bottom of their front page to a page that showed their Fuel Surcharge for now and the last three months. It did not take a calculator to figure how much I was not getting paid, as this Company`s FSC was over 24.5% Not only had I not gotten any of the 24.5% and I was only getting a % of the base rate.
So long story short, last load from those guys, I will run home to empty before I haul freight for fuel cost.
Do your homework and it will pay big dividends.
P.S One shipper who posts their fsc is WWW.siftocanada,com Check it out
 
I know that generally here and at my last 2 employers over the past several years, we generally paid all in unless we had a specific agreement with a carrier to use their FSC. But generally not because the dispatchers didn't want to back everything out of it to figure everything out.

I find generally that when you look in aggregate, the FSC we collect goes out to our carrier partners.
 
Fsc

Bulldog,

If the carrier/broker is keeping the FSC from the customer it does not necessarily mean that he is reaping you off. That he pays you 1000 $ + 25 % FSC or 1250 all in, what’s the difference ? Shouldn’t it be the bottom line that counts ?

Maybe he charges his customer a lower rate and takes into consideration that he is getting the FSC. Money is money, if you agree to the rate that he is giving you and pays you on time. What’s the problem ?
 
Fsc

Shakey said:
Warex187 guessing he is an O/O and gets paid percentage of revenue, and most companies pay O/O all the FSC not a percentage of it so if paid on total the O/O would be getting the short end of the stick for sure.
Click to expand...

My bad, In this scenario I do understand Bulldog’s rant, I was looking at it from a carrier/broker perspective.

Thanks Shakey !
 
warex187 said:
Bulldog,

If the carrier/broker is keeping the FSC from the customer it does not necessarily mean that he is reaping you off. That he pays you 1000 $ + 25 % FSC or 1250 all in, what’s the difference ? Shouldn’t it be the bottom line that counts ?

Maybe he charges his customer a lower rate and takes into consideration that he is getting the FSC. Money is money, if you agree to the rate that he is giving you and pays you on time. What’s the problem ?
Click to expand...
Hi Warex
My point is that the broker/carrier quoted me x dollars for a load that is not including the FSC. Their quote is so many % of the freight for the load and there is no FSC in the quote. If they want to quote so many dollars including FSC fine, if they want to quote so many dollars and FSC on top of that fine. Just don`t quote me a rate and tell me you are paying so many % of gross when you are not.
And to clarify I am not an o/o, I own a trucking company , and we have moved many brokered loads as backhauls. I agree that if you agree to the quote than that`s what you agreed too. My post was a heads up to all who may come up short on their share of the load. Check the shippers FSC and make sure your agreed upon rate includes it.Why leave 24.5% on the table.?
Just my opinion, excuse me for making it look like a rant.
Have good one!
 
Fsc

The whole FSC thing is very misleading.

It is generally used by large corporations that would have great difficulty addressing rates on a one by one perspective.
The same base rate applies to all carriers and the fsc is adjusted weekly.

The base rate for some of these loads goes back several years and the FSC represents nearly 30% on FTL.

An owner operator may only be in your employ within the last few months and runs at an agreed rate per mile.
His remuneration really has little to do with the FTL rate and the complete 30 % FSC.

The O/O's remuneration should only represent the fluctuation in the % of FSC from his moment of signing on.
 
Bulldog, I think you are assuming that the people who gave you this load are pocketing a percentage of the base rate plus the 30% FSC. My question is, how do you know this? In my case, and I think in most other carrier's places rates have either remained unchanged or gone down over the last few years. The FSC has become the only increase a carrier can expect from most customers. How the FSC gets distributed is not your concern. Whether there is a 5% or 50% FSC or the base rate is $1000 or $2000 should not matter to you, what should matter is that you got what you needed to come home. If you didn't, then that is your mistake not theirs.
 
Fuel surcharges?? I'm so confused... Help...

I've seen tons of different ways to figure out fuel surcharge and don't know which is right. Please help me figure this out so I can understand this whole fuel surcharge business and ensure that I'm not screwing our Owner Operators or our company. In my estimation, it must be fair to both parties.

Please keep in mind that I'm not the brightest bulb in the pack. I'm typing this real slow because I can't read very fast, lol...

Here's and example (all numbers are fictitious) of what we do now:

A load going 1710 miles, we charge our client $5800. We pay our O/Os 80% of $5800 = $4640.00. That's it, fuel surcharge included in this price. The bottom line, if you will.

Example 1 - Based on FSC as a percentage using the same numbers as above, I work out the following:

Back out the FSC (todays rate as per the Nationa Traffic Service website is 33.7%) which now makes the base rate $4338.40.
$4338.40 less 20% = $3470.72 + FSC (on $4338.40) $1460.04 for a total to the O/O in this example of $4932.76. In this example, I'm screwing my O/O by about $300 per load.

Example 2 - Based on Truckers Helper website, the FSC is paid on actual fuel and actual mileage. So using the above figures of the FSC backed out $4338.40 and using a mileage based FSC, here's what I come up with:

Average price per gallon (Midwest region) - $3.789 per US gallon
Less base figure of $1.15 per gallon = $2.639 FSC. You then divide that by the O/O's average MPG of 5.06 = $0.52 FSC per mile. So, $0.52 FSC per mile x 1710 miles = $892.15

So, 80% of the base of $4338.40 is $3470.72 + $892.15 = $4362.87.

So in this example, I'm screwing the company out of about $300 per load.

What's the right way to figure out the FSC so that its fair for everyone?

Thanks in advance to those who can educate this hayseed...
 
I will stick my nose in here, and this is only my opinion.
The purpose of FSC in my mind is to ensure that we are whole on the increased fuel costs associated with a load. The problem is, what is your increased fuel cost?
Is it based on 45 cent fuel, 50 cent, 75 cent? And what is the percentage of fuel cost in your overall cost (i.e. short haul, long haul, ltl...)
When I was at Corporation X, we did not put FSC recovered into gross revenue, it went in as a negative expense. This showed that their base rates were so bad, that FSC was their only source of margin. If the fuel gods dropped fuel back to .45/L, they would have been losing money.
In my opinion, there is no hard and fast way to calculate FSC, despite what people say. Under most percentage FSC models, as fuel increases, your margin increases (FSC increases at a different rate than fuel cost as a dollar amount). You are then making money off FSC, which is fine if your customer won't give you base rate increases.
I found the only way to be 100% fair to o/o's was to have a fuel cap (if they buy fuel through you), except that opens up a can of worms too. They can sell fuel, the poorer mpg o/o's cost you more than the better ones, etc. You either have to know all your o/o's, or watch them like hawks, or both.
In a straightline x% for X per litre increase scenario, somebody is gonna get screwed. Either the o/o, the company, or the customer, depending on where the FSC starts. Just do what you are comfortable with and keep an eye out for swings that really hurt someone.
FSC really depend on your operation, leg lengths, equip type, tl/ltl, etc etc. Go with what you feel is right.
 
For those of us that can remember that far back, fuel surcharges were intended to be a temporary measure to help cushion dramatic spikes in crude oil prices caused by political turmoil abroad. At the time, everyone believed that oil prices would eventually settle back down and the surcharge wouldn't be required any longer. Funny, that's what they said about Income Tax that was introduced to help pay for the First World War and would be abolished once the bills were paid! I have always thought the best way to compensate O/O's, was to pay them strictly a percentage of the load revenue. They're the ones using the fuel as they see fit, so they should be the ones paying for it. The company should ensure that they are charging their customers enough, either all inclusive rates or an additional FSC, to compensate the O/O properly. Really, 80% of a $2000.00 load is still 80% whether or not the $2000.00 is made up of base rate + FSC or not.
 
Bull 958

I cannot agree with your view.

It is very much the o/o's or carrier's concern.

The FSC is charged so that the entity that actually carried the goods gets properly compensated for additional costs represented by the unpredictable increase in fuel costs during the duration of the contract.

The FSC is not intended to be used as a means for a broker or a carrier to increase his margin.

In essence if this is the case , then a misss appropriation of funds is occuring. If you do not own the truck that is consuming the fuel , then you do not get to keep the FSC.

If you are a broker, the entire FSC must go to the carrier. If you are a carrier employing O/O's then all the fsc must go to them for the portion of the trip they carried out.

Any other way , it is simply theft.
 
alx,

As I mentioned in one of my previous posts what is the difference that you get 1250 $ or 1000 $ + 25 % fsc ? Rates for transport are consistently fluctuating, so when you agree for a load, it is for the money that you see fair. What the carrier/broker charges to his client it's his problem. I personally provide some clients a base rate plus a % for fuel surcharge just so the rate looks smaller or it’s a lane that has high fluctuation in price and I want to have a better control over the profit margin (sometime the FSC that I charge is 5 % and other time is goes up to 35 %). Some big companies use fuel surcharge (most of the time the national published one) for all their loads (so they can use it as a tax deductible) but you have to adjust your rate in consequence, if you don't you just don’t get the load. It's just playing with numbers ! What should matter to any (customer, broker, carrier, O/O or driver) it's the bottom line.

Just my opinion
 
Ware X

What you are missing here is the principle.

We are a trucking company and also sell our excess as well as points we do not service via our own equipment.

The FSC is not a marketing ploy that you can manipulate as you wish. Unfortunatly this seems to be what it has become.

Again , one must go back to what the purpose of the FSC is. It is not there to increase profits , rather to defray added costs.

If you are charging your client an FSC , all of those monies must go to the one buying the fuel.
If this is not the case then, you are misleading your client into thinking that the charges they are incurring are being spent on fuel.


******* I stress the MISLEADING *******

You can explain it away any way you want to, but the truth is it must go to the one buying the fuel!!!
 
alx said:
What you are missing here is the principle.

We are a trucking company and also sell our excess as well as points we do not service via our own equipment.

The FSC is not a marketing ploy that you can manipulate as you wish. Unfortunatly this seems to be what it has become.

Again , one must go back to what the purpose of the FSC is. It is not there to increase profits , rather to defray added costs.

If you are charging your client an FSC , all of those monies must go to the one buying the fuel.
If this is not the case then, you are misleading your client into thinking that the charges they are incurring are being spent on fuel.


******* I stress the MISLEADING *******

You can explain it away any way you want to, but the truth is it must go to the one buying the fuel!!!
Click to expand...

Alx,
If you go back to my question regarding how to compute FSC properly, which formula does one use? A percentage of load formula or an actual fuel and mileage formula?

I'm not trying to be facetious or out to screw anyone. I just want to make sure I'm doing it right.

If I use the actual mileage and fuel formula, then the truck will be making about $300 less than he's making today. So if that's what you are eluding to, that the truck gets absolutely every nickle of the fuel surcharge, then should I then tell him to repay us for all the extra cash that he has been getting all these years from our generousity?

What's good for the goose... Again, I'm not trying to be a smart-ass, just wanting to make sure we're doing it right. How do you assess FSC for your O/O's???
 
Alex, I understand your point about the FSC going to the one burning the fuel and while I agree unfortuneatly I don't think it is quite that simple. We have some customers who pay FSC and some customers that don't. So how would you suggest I pay my O/O's? To simplify things we pay a fixed rate based on miles which is adjusted weekly. So on some trips we win, and on others we lose. In the end I think it balances out(or should by the law of averages, anyway).
 
This really is interesting, poor ManitobaMoose ain't getting his answer though.
Here, I just pay straight % to o/o, because most of my rates are spot rated, so there is no FSC, and i figure a fuel cost of .72/mi when i work my rates. My rate calcs changes with fuel cost
Moose, if you are like most, you have rates and/or contracts that were written at various points in time, when the base price was different, rates with no FSC, etc.
If you try to pass along FSC to o/o's that you get, you will have nothing but distrust from drivers, because they will never know what they are getting until they get it, and places like Sifto used to do FSC after the fact, so you were crediting and debiting invoices.
If you want to be fair...use your fleet MPG, figure the cost per litre when fuel was written, and come up with a cost per mile for diesel at start of owner op deal. Figure the difference betweeen then and now, and voila, there is your FSC the owner ops deserve. Then it doesnt matter what you negotiate, the owner operator is not gaining or losing from when he signed on with you.
 
Calculation

The following modes of assessement do not change the fact that every penny of FSC should go to the one purchasing the fuel.

I am sure this might occur 5% of the time at best. The other 95% of the time the FSC gets mis used. Not always on purpose.

There should be an FSC police about as much as there should be an agency overlooking the misuse of trust accounts for freight brokerage!!!


In the case that one deals in FTL , the rating should be straight forward. The FSC is a percentage that is published by the trucking association and should be indicated on your website. The same applies for LTL shipments.
If the o/o's work on percentage than it is a simple calculation.
In case they are paid by mile, one simply pulls out their Fuel tax report for 4 consecutive periods and comes up with their average fuel mileage for the year.
Convert that into $ / mile . Look at the increase that the FSC brings you on the cost per mile you charged your client for the load and substract your pick up and delivery cost and the remainder goes to the owner op.

Or as in our case , we simply added $.05/ mile to the rate we paid the o/o. Since we do mainly LTL we do not always get the FSC from the client, so to keep a good employee we may lose a little.

Maybe that is why I drive a Ford and not a Mercedes , but I sleep well at night!!!
 
If everyone is paying the same FSC industry wide, then the whole premise of the original point makes sense. But FSCs aren't temporary as they once were. It seems in Canada, FSCs used by shippers are based off FCA-NATC (most are not paying 100%, usually between 60-75%). In the US, the tendency on full load shipping is the use of an RPM fuel index, and depending on how the company wants to report their expenses, they may use a low peg with a high FSC amount or the opposite ... I have customers on all ends of the scale.

As someone working for a company that both carries and brokers, I can tell you that we figure out our lane cost and add a margin and reverse the fuel out. As long as we are getting what we need on the bottom line, we couldn't care less which index we use. Hey, on some spot customers, people will quote all in rates!

Because of that, one cannot say that they pay all their FSC out to carriers on brokered loads, or pay their O/Os the entire FSC. As a carrier with O/Os, you need to set your own peg of what you pay as a base per mile or whatever to O/Os plus an index of what you pay as FSC to them.

Over the past few years as fuel has risen, I can tell you that in aggregate margin % has slipped and not increased.

There may be players out there using FSC as a way of screwing their employees, but generally not. There just has to be a creative way of dealing with the different ways customers pay FSC.
 
More questions...

Thanks to all for the replies...

Again, I'm not that bright but some questions come to mind. And please keep in mind we are a small company and cannot devote a gaggle of employees to just monitor driver's and o/o expenditures and FSC so we try to keep it simple around here.

If Alx is right and the way he does it is the correct way to do FSC,:
1 - Which base figure do you use to start your calculation? $1.15 as per the Truckers Helper website or some other base line #? Why?

2 - What percentage do you use? 24.5% as per the salt guys (as someone else stated) or 33.7% (this week) as per National Traffic Service website, or some other percentage factor? Again, why?

3 - Do you have to use actual fuel purchases and actual mileage to calculate FSC to the penny or are there some "assumptions" in calculations?

4 - Let's say you are doing an LTL load with 6 picks, what do you pay the o/o if:
A) 2 of your clients are paying 10% FSC on mileage
B) 1 of your client pays you NO FSC
C) 3 of you clients are paying you 25% FSC on percentage of freight cost

At the end of the day, let's say you are driving 2,000 miles but you have collected FSC from 5 of your clients for the same distance. Is that fair to your client if you are charging FSC to all of them? Is your o/o getting more FSC than he deserves since, according to what you said before, he should be getting all FSC on actual miles and fuel? What happens to the o/o with the client that paid no FSC? Do you have to show proof of the amount of FSC collected from your clients to the o/o?

I know, a ton of questions but, inquiring minds want to know...

From what I can see, and correct me if I'm wrong, there is no right or wrong way to calculate the FSC. Some (like ourselves) do it as a percentage and some go through a rather painstaking calculation. In my humble opinion, at the end of the day, it doesn't matter how you calculate the FSC from what I'm understanding, as long as both parties are in agreement.

Am I wrong in my assumptions?
 
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