Recently, many companies have observed that, even though ocean freight rates have leveled off, total logistics costs remain high. The main issue is inland: moving goods from ports to warehouses, known as inland or domestic transportation, is becoming increasingly expensive.
This trend reflects structural challenges within the logistics system rather than short-term market fluctuations. Understanding these underlying factors is the first step toward developing effective responses.
In this article, we’ll explain how the North American transportation network operates and why inland freight costs are still high. By looking at the entire system, you’ll get insights to help you review your company’s logistics costs and choose ports more wisely.
Common Misconceptions About the North American Shipping Cost Structure
Before we go further, let’s look at how many companies view inland transportation costs. Clearing up these misunderstandings is the first step to understanding the process.
In North America, transportation costs generally span four stages: Port → Rail → Truck → Warehouse.
In reality, many businesses focus only on ocean freight rates and leave inland transportation to freight forwarders or logistics providers. This can cause several common misunderstandings, such as:
- “If it’s CIF terms, the port determines it—so it doesn’t matter.”
- “Just hand it off to the freight forwarder.”
- “Inland costs fluctuate too much to control.”
Why do these misunderstandings keep happening?
The main reason is that inland cost structures are complicated and not always clear. These costs can vary significantly based on contract terms, the port used, the type of cargo, and the destination.
A common and expensive mistake is thinking that CIF terms always include inland delivery. In reality, this can lead to surprise surcharges or extra inland fees.
To avoid these pitfalls, companies must first develop a clear, data-driven understanding of U.S. transportation routes and their underlying cost components.
Route and Cost Breakdown from Port to Warehouse
In North America, it is common for goods to be transported thousands of kilometers inland from ports to cities. After containers are unloaded at the port, they are transported by rail to inland container yards (CY), and finally delivered to warehouses by truck.
Example of Typical Costs for Different Transportation Segments
| Segment | Average Distance | Estimated Cost (40 ft) | Mode | Notes |
|---|---|---|---|---|
| Port (Los Angeles/Long Beach) → Inland Container Yard (Chicago) | Approx. 2,000 miles | Around USD 2,800 | Rail | Includes IPI rate and FSC |
| CY → Warehouse | Approx. 200 miles | Around USD 600 | Trucking | Includes short-haul transport + chassis fee |
| Warehousing | – | Around USD 400 | 3PL | Storage period: 5 days |
Considering all these factors, it is not uncommon for transportation costs to exceed ocean freight charges. Improper port selection, customs clearance locations, and mode of transport design can all lead to unexpected expenses.
Now that we understand this cost structure, let’s examine the factors driving the persistent rise in costs.
5 Reasons for Rising Inland Transportation Costs
| Factor | Description | Practical Implication |
|---|---|---|
| IPI system and inland CY maintenance costs | Terminal maintenance costs charged by rail companies | Higher CY closure/transfer rates |
| Rising labor, fuel, and insurance costs | Increases in driver wages, fuel expenses, and insurance premiums | Higher per-mile rates and fuel surcharges |
| Imbalanced backhaul capacity | Many return trips from inland to ports are empty | Higher one-way freight rates |
| Insufficient rail capacity and delays | Labor shortages, rail infrastructure aging, and inadequate track maintenance | Longer lead times and increased storage costs |
| Transloading speed and inbound coordination errors | CIF Chicago and other spelling or routing errors | Additional charges or unexpected contractual costs |
These factors work together in a chain reaction that drives up costs. For example, train delays can cause warehouse backlogs, leading to higher storage fees and additional truck waiting costs. These expenses add up over time, rather than happening all at once.
This is not just a theory. The data clearly show these effects, as you can see in the following figures.
Current State of U.S. Inland Costs
By 2025, shipping a 40-foot container from Los Angeles to Chicago will cost approximately $2,800 (including rail and trucking fees), potentially exceeding $3,200 during peak seasons.
- BTS Transportation Price Index: 1.9% increase
- CH Robinson Trucking Report: Mileage costs up 4% year-over-year
Costs denominated in USD often rise more significantly because fuel prices are tied to exchange rates. These figures are closely tied to contract terms. Specifically, notation on the bill of lading directly impacts total costs.
Delving deeper into these data points, costs hinge on “contract terms and wording.” Location designations on the bill of lading influence cost structures.
A B/L stating “Port of Discharge: Los Angeles” and “Place of Delivery: Chicago” indicates inland transportation costs are included in the contract. Consequently, even with lower ocean freight rates, the total payment amount increases. The location names specified in the contract shape the overall cost structure.
Considering this contractual framework, let’s outline the essential items that must be verified in practice.
Three Key Points to Verify in Practice
When analyzing domestic transportation costs, there are three critical points to keep in mind. Addressing these early helps prevent misunderstandings and hidden expenses later on.
1. Specify the Delivery Location (Final Destination)
Make sure contracts and bills of lading clearly state the final delivery point, whether the shipment stops at the port or goes to an inland destination. If this is unclear, you might face extra charges or delivery delays.
2. Review IPI Fee Classification
Check whether IPI (Inland Point Intermodal) charges are included in the through rate or billed separately. This difference changes how you calculate total transportation costs and could affect which port you choose.
3. Estimate and Break Down Costs
Ask your freight forwarder for a detailed quote that shows ocean freight and inland transportation costs separately.
You can also turn these costs into clear, measurable indicators to help you improve over time, such as:
- Inland cost per mile
- Port-to-door total cost (the complete cost from port arrival to final delivery)
Port Selection Determines Profit Margins
A closer look at the data reveals a clear truth: final profit margins depend heavily on port selection.
Inland transportation costs are more than just extra freight charges. They pose a major challenge in the North American logistics network, influenced by factors such as port congestion, rail connections, and warehouse space.
For example, companies using the Port of Savannah often value efficiency, while those choosing the Port of Los Angeles look for flexible and diverse routes. Even if the destination is the same, such as Chicago, shipping costs can vary by hundreds of dollars per container depending on the port.
To lower transportation costs, focus on long-term strategic decisions instead of just negotiating prices for each shipment.
