Exporting using ocean freight rather than air freight is a much cheaper alternative, particularly when calculated on the basis of total costs.

Question

Answer the following statement true (T) or false (F)

Answer 1

False

Newcomers to exporting might assume that ocean freight is a better choice than air freight because ocean freight is so much cheaper. Comparison of total costs of each mode may suggest otherwise. Total cost components that may be lower for air freight include insurance rates, because of much less chance of damage during shipment; packing costs, because the shipment does not need the heavier, more costly export packing, which is usually done by an outside firm; customs duties, when calculated on gross weights; replacement costs for damaged goods, again because of the reduced damage risk; and inventory costs, because rapid delivery by air freight often eliminates the need for expensive warehouses.