Legal Definitions - class rate

A class rate is a standardized pricing system predominantly used in the freight transportation industry, particularly for Less-Than-Truckload (LTL) shipments. Under this system, various types of goods are grouped into specific "classes" based on characteristics such as their density, value, ease of handling, liability, and stowability. Each class is then assigned a particular rate for shipping, which can vary depending on the distance, the specific route, and the carrier. This method allows carriers to offer consistent and predictable pricing for a wide variety of commodities, simplifying the complex process of calculating freight charges.

• Scenario: Shipping diverse products.

  A company needs to ship two different items: a pallet of lightweight, fragile glass ornaments and a pallet of dense, durable steel pipes, both traveling the same distance via a freight carrier. The glass ornaments, due to their fragility and lower density, would likely be assigned to a higher freight class. The steel pipes, being heavy and robust, would fall into a lower freight class.

  Illustration: The carrier applies different "class rates" to each shipment based on their respective classifications. This means the ornaments, despite potentially weighing less, might cost more per pound to ship than the steel pipes because they belong to a higher-rated class, reflecting the increased risk and handling requirements.

• Scenario: Standardized pricing for common goods.

  An auto parts distributor regularly ships brake pads, which are consistently categorized under a specific freight class (e.g., Class 70) by the National Motor Freight Traffic Association (NMFTA). When the distributor requests quotes from various Less-Than-Truckload (LTL) carriers for shipping these brake pads to different locations, each carrier will use the established Class 70 designation.

  Illustration: While the *actual price* per hundredweight might vary slightly between carriers or destinations, the underlying "class rate" system ensures that brake pads are consistently grouped and priced according to their standard classification, providing a predictable basis for freight charges across the industry.

• Scenario: Impact of incorrect classification.

  A manufacturer introduces a new type of insulated packaging material. Initially, they mistakenly classify it as a general plastic product, which falls into a relatively low freight class. During an audit, the freight carrier determines that the material's actual density and specialized handling requirements place it in a much higher freight class.

  Illustration: The reclassification directly changes the "class rate" applied to future shipments of the packaging material, resulting in a significantly higher shipping cost for the manufacturer because the product now belongs to a more expensive freight class that accurately reflects its transportation characteristics.