Freight classification changes are part of the growing shipping industry, and the National Motor Freight Traffic Association (NMFTA) has again enacted changes to the National Motor Freight Classification (NMFC), which took effect August 5, 2017, changing the way we calculate freight class. Unfortunately, the NMFTA’s Notice of Disposition to guide shippers on how the latest changes will affect existing freight classifications can be confusing. In addition, shippers may feel worried or anxious about the new changes and how they will impact freight spend, their customers, and overall operations. However, shippers can effectively prepare for these changes by understanding them and knowing what they mean to their operations.
What Freight Classification Changes Did the NMFTA Make?
Most of the changes within the NMFTA freight classification schedules were made to eliminate the nine-tier freight classification rules, replacing it with a standard, 11-tier classification table. For example, the following changes to freight classification were made:
- Conduits and pipes not in packaging were changed to reflect density and dimensional classification, canceling item numbers 50940 and 50942.
- New glass protections were enacted.
- Item 41080 was established for temperature-controlled freight.
- Plumbers’ goods and water filters, purifiers, tanks, and softeners are amended to item 69105.
- Dietary supplements now fall under item 57300.
- Containers or crates with wheels or casters must have locking mechanisms in place.
- Packages likely to result in the filing of damaged claims must be overpackaged.
- Thermal, ceramic bricks are now class 50 in item number 32270.
- Solar panels were added to item 177010.
- Paper goods now have a freight class of 125.
- Subassemblies and essential parts of gambling equipment have been added to items 16340 and 16341, which remain unlawful to transport.
While these changes may prove troublesome, the most significant changes involve full-scale density items in Sub 4.
Sub 4 shipments with a density of four but less than six (4-6) pounds per cubic foot (PCF) will now have a freight class of 175, reflecting a jump from the previous freight class of 150.
Another change implemented involves freight classification when shippers do not properly calculate a shipment’s density. When this occurs, the package is subject to the “bumping” clause (item 170), which uses the lowest density freight classification available for assessing freight charges.
How Will the Changes Impact Freight Spend, Specifically Less-Than-Truckload (LTL) Spend?
Upon reviewing the freight classification changes, the impact on freight spend can seem severe. However, it boils down to a few key areas.
The changes may result in an increase to freight classification charges, especially among Sub 4 items. Since LTL shipments tend to fall within Sub 4, shippers using LTL shipments will see greater LTL spend. In addition, the changes to packaging requirements, including the need to overpackage certain items, will impact the actual density of their shipments. Consequently, shipping classification may change to a lower-density rate.
Shippers without carrier-client agreements for freight all kinds (FAK) classification may see fewer opportunities for freight classification within FAK classes impacted by the Sub 4 change. Also, shippers with FAK classes of 100-150 may see their FAK classes vanish as carriers begin working with the actual density, as defined in Sub 4. But, shippers who successfully renegotiate FAK agreements may see LTL costs decrease if contractual terms change under the new NMFC, pushing freight class 175 to an FAK range near class 150.
How Will the Changes Impact Your Customers?
The new freight classification changes will impact customers in terms of purchase price and shipping costs. Depending on your company’s shipping options, customers may see initial shipping costs increase. Companies offering free shipping may require a higher per-product purchase price or a higher order-total threshold to cover the increased shipping costs.
For example, shippers routinely offering free shipping for purchases over $50 may increase the free shipping threshold to $60. This offsets the additional costs of sending packages via LTL in the new NMFC.
Shippers should also notify customers of changes to packaging requirements for certain commodities.
What Can Shippers Do to Prepare for the Changes?
Immediate increases to all shipping costs during NMFC changes are myths in the industry. The key to avoiding increased costs lies in taking steps to prepare and take advantage of the changes. In a previous blog post, published by Manufacturing.net, we explored how shippers can avoid increased costs upon the implementation of freight classification changes, which include the following:
- Shippers need to understand freight classification. Not understanding the new freight classification changes and unchanged freight classes will result in the incorrect classification of shipments when processed in your facility. Incorrectly assessing packages’ density and dimensions can also lead to higher costs.
- Technology can make freight classification faster and accurate. Advanced systems, including transportation management systems (TMS), like the Cerasis Rater, can automate freight classification and shipping processes.
- Shippers should audit freight bills. The benefits of auditing include catching past mistakes, preventing double billing, and ensuring classification within a company’s specific FAK agreements. So, auditing freight bills is critical to keeping shipping costs down.
- Third-party logistics providers (3PLs) can handle the entire freight classification process. This includes working with multiple carriers to achieve the lowest FAK and freight class possible for your shipments. In fact, Chuck Fattore of Inbound Logistics notes most 3PLs will audit the NMFC codes on bills of lading, which identifies misclassification of past shipments at higher rates to request refunds and reimbursements as necessary.
Putting It All Together.
The new freight classification changes are now in effect, assuming you are using carriers that adhere to the NMFTA freight classification rules. If you have not previously reviewed the new changes, you could already be overpaying on shipping costs. Take the time to review the changes in the in NMFC, and use the preparation tips above to gain better control over your freight classification processes now.