Contract Rate
A pre-negotiated freight rate established through a formal agreement between a shipper and carrier (or broker) for a specified period, typically one year. Contract rates provide price stability and guaranteed capacity for the shipper, while giving the carrier predictable revenue and volume. They are usually lower than spot rates but require volume commitments.
Detailed Explanation
A pre-negotiated freight rate established through a formal agreement between a shipper and carrier (or broker) for a specified period, typically one year. Contract rates provide price stability and guaranteed capacity for the shipper, while giving the carrier predictable revenue and volume. They are usually lower than spot rates but require volume commitments.
Example
A manufacturer signs a 12-month contract with a carrier at $2.30/mile for weekly dry van loads from their plant in Ohio to distribution centers in the Southeast.
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