Shipping Freight Rates: Spot or Contract?

Nick Terry • February 1, 2023

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Shipping Freight Rates: Spot or Contract?

Shipping rates usually fall into two different categories: spot rates and contract rates. A spot rate is a one-time rate offered by a transportation provider to move a shipper’s product from one point to another. A contract rate is a longer-term commitment between a shipper and carrier in which the details are fixed over a period of time for multiple shipments.

Both have substantial reasons to choose them and can suit your specific shipping concerns. Let’s look at both, discussing the pros and cons of each to help determine which is the right type for you. By the end of this blog, you will better understand freight rates and how to make the best decision for your shipping needs.

Spot rates

As its name implies, this freight rate is for when the deal needs to be done on the spot or relatively soon to get the shipment where it needs to go. A spot rate is often the last-minute option when shipping a product that needs to be quickly delivered. Spot rates can apply to almost every kind of truck shipping — full truckload, less-than-truckload (LTL), dry van, flatbed, and reefer trucks. Because of the volatility of spot rates, shippers use them much less commonly than contract rates.

Spot rates are usually limited to a short period and can be affected by fluctuations in the market. They are often more expensive than contract rates because supply and demand drive the rate. With higher demand comes a higher price. If the demand is lower, then the price will drop. Other factors, such as fuel prices, can also affect spot rates. For owner-operators and carriers, spot freight rates often help fill up their capacity when they are between contracts or when they have trailer space during backhauls. There are some whose business exclusively deals with spot rates. The shippers who use spot rates are quite often the ones with inconsistent shipping patterns and irregular lanes. They cannot use contract rates because their shipments routinely don’t head to the same destinations, and the other particulars involving their shipment are not always consistent.

Pros

Immediacy: When you get a random order that needs to be shipped on an atypical lane or at an unusual time, a spot rate is the best way to go because shippers and carriers can make deals right away.
Flexibility: There are plenty of options when searching for a spot rate, from the type of vehicle to the price to the shipment’s route.
No long-term deal: Spot rates are for one load only, which keeps you from being locked into an agreement over time.
Free to negotiate: While time limitations may put you in a bind, you still can deal on a case-by-case basis for just about every other factor. And, if the demand drops over time, you might even save money because you’re not locked into a contract rate.

Cons

Higher rates: In all likelihood, you will have to pay higher rates because it’s a one-time deal to fill an immediate need--unlike contract rates that usually have a reduced rate because they factor in consistent, recurring volume.
Volatility: If the economy or other factors shift quickly, you would have to pay higher spot rates each time because there are no price guarantees.
Accountability and security: With spot rates, there can often be the possibility that you don’t know the transportation partner well or at all. So trusting them with a shipment assumes more risk than dealing with a partner you would regularly use if it were a contract rate. Plus, it is much harder to build a rapport that can lead to bigger things.
Forecasting is impossible: All businesses have budget plans, but when you don’t know the shipment price in advance, it is difficult to forecast what will be spent on the shipping part of your budget.
Time spent negotiating: With each spot rate, there will have to be a negotiation. That means shippers might spend quite a bit of time making each deal.

Contract rates

While a spot rate is seen as the immediate need option that can involve uncertainties, a contract rate is the opposite. With a contract rate comes a fixed price and volume guarantee for a specific lane over a set period of time. It is usually done yearly but can last for half or a quarter of the year. Contract rates comprise most of the truck shipping industry rates and are based on an estimated shipping volume at a specific per-mile rate. They are nonbinding and negotiated in a bidding process. After you have agreed upon a rate, it allows you to better forecast and budget for shipping costs.

Contract rates are split into two sections:

Line-haul rates are the basic costs for a shipment to be transported from Point A to Point B.
Accessorial rates, meanwhile, help compensate for higher prices if the haul is more costly for the carrier. A typical example of these rates is the fuel surcharge rate. If the fuel rates rise on the Department of Energy’s index for nationwide diesel prices, then this type of rate is likely to be charged.

Pros

Predictable cost: With the price locked in, you will not get bit by rates that might have huge increases down the road. Also, contract rates allow you to more accurately assess the costs for budget concerns.
Availability: By going the contract rate route, a company has availability for all loads. There is no need to spend time and resources trying to track down a partner for each and every shipment. It assures priority access to capacity during high-demand periods.
Familiar, stable partner: The longer and more often your company works with a specific partner, the better they will get to know you, your processes, and your facilities. That usually equates to higher service levels from them to keep the relationship going. It’s almost always easier to mitigate problems when you already know the partner well.
Damage control: With a partner you have worked with regularly, you will know they are dependable, and there is likely to be a reduced number of damages over choosing multiple carriers using spot rates.

Cons

Less flexibility: When using a contract rate, you are sticking with one company and following all the stipulations in the contract. If your situation changes in specific ways, the carrier might not offer the agreed-upon rate.
Change in the market: If a significant market fluctuation results in lower rates, you will not be able to take advantage of it due to existing contract terms.
Spikes in volume: It could become problematic for your service provider to meet your needs if volume suddenly increases significantly.
Dependence on volume consistency: If your capacity is different each month, rates for some of your shipments might fall outside the terms of your deal, and you would have to depend on spot shipments to cover the extra loads.
Lane concerns: If your company’s shipments do not regularly use the same shipping lanes, there might not be able to commit volume to a contract rate for a specific lane.

Determining the Best Option for Your Business

Both spot rates and contract rates have benefits and risks. The decision on which one to choose should best suit your business. If you have relatively consistent factors in your production, such as the volume and timing of your loads and the lanes, then contract rates will most often be your answer. If your company has many factors that fluctuate, be it timing, volume, or distribution lanes, then spot rates are likely the way to go. You can weigh the pros and cons mentioned above to help you make that choice.

You also have to decide what factor matters most for you. Is it price or reliability, or service? From there, you can decide on spot rates, contract rates, or even both if you have some shipments that suit one rate type and certain loads that fit the other.

EFS Could Be Your Perfect Partner

With spot rates and contract rates, the shipper has two varied options. Each has viable reasons to choose that particular one for some or all of your shipment needs — reliability, flexibility, cost, etc. Knowing these rates and deciding which one to use adds another layer of complexity to your logistics department. If the burden becomes too great for your logistics team or you want to have your employees working on other concerns, you have a way out with Entourage Freight Solutions. As a third-party logistics solutions company specializing in foodservice, EFS can help you overcome issues with an extensive background and unmatched service. To get more detail on how we can assist your company and request a quote, check out our website today.

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Tariffs, Trade Policy, and the Great Freight Fallout

By Nick Terry • April 28, 2025

In 2025, trade policy is no longer something that the freight industry can leave on the back burner. Trade policy today is shaping strategy at every level. From tariff escalations and retaliatory duties to sweeping regulatory changes and targeted maritime fees, supply chain leaders are navigating a freight market in which unpredictability is the only constant. Sourcing decisions are shifting, pricing dynamics are unstable, and long-standing operational models are being rewritten in real time. This edition brings together key stories highlighting the growing pressure across logistics channels. Each development points to an industry moving fast, and often reactively, to keep pace with volatile policy decisions. Tariffs Stall US Freight Recovery as Shippers Pause Orders The recent move by the U.S. Trade Representative (USTR) to impose entrance fees on Chinese-built ships calling U.S. ports has only added to the confusion and uncertainty gripping global supply chains and freight operations. Shippers are pausing plans and slashing orders, with truckload volumes, containerized imports, and manufacturing output all showing signs of contraction. Ocean freight spot rates have collapsed: Asia-U.S. West Coast rates have fallen 61% since January to $2,050 per FEU, while East Coast rates have dropped 53.7% to $3,100 per FEU . Blank sailings are rising, with vessels leaving Asia half-empty. Amazon and Five Below are among the major retailers reducing orders from Asia. Container imports jumped 15.3% in 2024, but forecasts now predict a 20-27% decline through the summer. Exporters, particularly agriculture and forestry suppliers, are also squeezed, facing 125% retaliatory tariffs from China. Truckload and intermodal rates remain stagnant, while U.S. factory output fell sharply in March. US Apparel Importers Brace for Long-Term Volume Declines According to Trade Partnership Worldwide, a 124.1% tariff on Chinese clothing and footwear is expected to reduce U.S. apparel imports by 1.6% annually . China still accounts for 41.7% of apparel shipments, leaving limited flexibility for diversion. The American Apparel and Footwear Association (AAFA) is warning of price hikes and mounting infrastructure stress as sourcing pivots toward Vietnam, India, and Indonesia. A looming May 2 deadline for de minimis exemptions could further complicate flows and delay deliveries. Even with a temporary 90-day pause in reciprocal tariffs, the policy uncertainty already affects long-term planning. AAFA CEO Steve Lamar calls the shifting policies “chaotic,” and warned that high tariff pressure will hit both importers and U.S. manufacturers reliant on Chinese components. Port and rail capacity limitations at larger gateways are adding to concerns. Retailers now face rising costs, shrinking margins, and operational delays — all while consumer demand continues to shift rapidly. Freight Pricing Gains Lose Momentum According to the TD Cowen/AFS Freight Index, Q1 truckload rates rose 5.9% above the 2018 baseline, but are expected to decline slightly in Q2. Shippers are responding to tariff threats with aggressive front-loading and shorter-haul routes, driving per-shipment costs to three-year lows. LTL carriers remain focused on profitable lanes and high-quality freight rather than chasing volume. The index forecasts a 0.7% year-over-year increase in LTL rate per pound for Q2 , despite sustained demand softness and macro uncertainty. A key driver behind the softening spot market conditions is a shift to shorter hauls and regionalized distribution, pushing per-shipment costs to their lowest point in more than three years. This trend reflects how retailers and manufacturers are repositioning inventory in response to tariff volatility, as NRF’s Jonathan Gold and DAT analyst Dean Croke noted. Meanwhile, the LTL sector is seeing a 4% rise in fuel surcharges, offsetting lower weights and shorter hauls. With the freight market still under pressure after 26 months of contraction, optimism remains subdued as we enter the midyear period. US Truckload Freight Spot Rates Continue to Fluctuate National benchmark rates have experienced a decline across all categories. As of April 18, dry van decreased by 4 cents to $1.62, reefer by 2 cents to $1.88 , and flatbed by 3 cents to $2.16. This marked the first overall decrease since late January, signaling potential shifts in market dynamics. These changes can be attributed to factors such as tariff uncertainties and tighter capacity, especially affecting the flatbed market. Flatbed rates rely heavily on manufacturing activity in the country, which has been particularly hard-hit by the ongoing trade war with China, and to some extent, with the rest of the world. US Finalizes Tiered Fee Plan Targeting Chinese Ships The U.S. is moving forward with a revised plan to levy voyage-based fees on Chinese-owned and Chinese-built ships calling at American ports. The U.S. Trade Representative (USTR) announced the measure as part of a broader Trump administration effort to counter China’s dominance in shipbuilding and logistics while reigniting domestic ship construction and port infrastructure investment. Starting in six months, Chinese operators will be charged $50 per net ton, with an annual increase of $30 for three years . Non-Chinese carriers using Chinese-built vessels will face lower rates, beginning at $18 per ton or $120 per container, with annual increases. The USTR capped fee applications at five voyages per vessel annually, scaling back its original, more punitive per-port-call proposal after intense industry pushback. The fees are tied to findings from a USTR investigation, which concluded that China’s shipbuilding dominance — producing 29% of global fleet capacity and 70% of all container ships on order — stemmed from unfair trade practices. Exemptions apply to ships arriving empty, those in the Great Lakes or U.S. territories, and some bulk exports. LNG vessel transport restrictions will phase in over 22 years to support U.S. production. China’s largest container carrier, Cosco Shipping Lines, has sharply criticized the USTR’s plan. In a strongly worded statement, Cosco labeled the move as “discriminatory,” and warned it would disrupt global industrial and supply chain stability. Cosco denied allegations from that USTR investigation that claimed China manipulated its shipping and shipbuilding sectors to gain an unfair advantage. The carrier said it upholds “integrity, transparency, and compliance” in global competition and remains committed to ensuring the resilience of international trade. Walmart Investing $6B in Mexico, Central America Store Expansion Walmart of Mexico and Central America will invest $6 billion to open new stores across the region , reinforcing its long-term commitment to growth in Latin America. The expansion will include Bodega Aurrera, Walmart Supercenters, Sam’s Club, and Walmart Express formats, building on a robust network of 3,200 stores across all 32 Mexican states. This latest move echoes Walmart’s earlier $1.3 billion investment in 2016 for regional distribution and operational upgrades. The retailer entered the Mexican market in 1991 with a Sam’s Club in Mexico City. In a statement, Walmart said the new expansion reflects confidence in the region’s economic potential and consumer demand. Globally, Walmart continues to invest aggressively in infrastructure and store development. The company has pledged about $4.5 billion for its Canadian operations and $1.3 billion in Chile to build 70 new stores and a distribution center. In the U.S., Walmart is executing a five-year plan to build or convert more than 150 stores while modernizing 650 existing locations under its “Store of the Future” initiative. Experience Seamless Shipping with Entourage Freight Solutions Entourage Freight Solutions believes in total transparency in the shipping process. That is why we invest in tech solutions that track every shipment extensively, monitor every driver, and extract every bit of efficiency without sacrificing quality. Our state-of-the-art platform utilizes cloud-based GPS tracking to keep you informed, reroutes shipments on the fly to avoid delays, and even responds to real-time market changes to ensure you receive your shipment on time and as soon as possible. Our Services Full Truck Load (FTL): When you need a truck all to yourself. Less-Than-Truckload (LTL): Efficient solutions for multi-stop shipments or combining smaller loads to save on costs. Refrigerated Trucking: Keeping your temperature-sensitive products fresh and safe. Cross-Docking: Strategically located facilities in Shelby, Ohio, Cedar Rapids, Iowa, and Romulus, Michigan, for streamlined consolidation, storage, and distribution. Ready to experience a new level of service and control in your freight shipping? Request a quote today to see how Entourage Freight Solutions can help with your freight movement and other supply chain needs.