How transportation costs are billed

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1. Two ways transport reaches the case

Moving a Foreign Military Sales shipment creates costs that the Defense Department has to recover and pay out. The Financial Management Regulation handles this in two ways. Actual transportation costs of delivering defense articles are billed on the SF 1080 voucher or on government bills of lading, and paid from the transportation surcharge account (FMR Vol. 15, Ch. 8, para. 7.3). Some costs are instead folded into the price of the article or service and reported through the delivery transaction. How the buyer is charged for transport in the first place is covered in notices of availability and what transport costs.

Where the item comes from matters. Transportation from Defense Working Capital Fund stocks to the purchaser’s freight forwarder is included in the cost of the article reported to the Defense Finance and Accounting Service (FMR Vol. 15, Ch. 8, para. 7.3). Inventory shipments from the fund beyond the freight forwarder are billed as a below-the-line charge under the regulation’s tables. Bills paid from the surcharge account must carry a valid case identifier: country code, implementing agency code, case designator and date of shipment.

2. What stays off the voucher

The regulation lists four costs that must not be billed on the SF 1080. Transport of government furnished materiel to a contractor’s plant is included in the price of that materiel (FMR Vol. 15, Ch. 8, para. 7.3.1.1.1). Transport on repair and return cases is included in the cost of the repair service (FMR Vol. 15, Ch. 8, para. 7.3.1.1.2). Discrete costs above the line, such as a high flight or special airlift, are reported as a case charge through the delivery transaction (FMR Vol. 15, Ch. 8, para. 7.3.1.1.3).

The fourth is inland movement in the United States. The cost of moving working capital fund materiel from its point of origin to the point where the purchaser picks it up is borne by the fund (FMR Vol. 15, Ch. 8, para. 7.3.1.1.4). That pickup point may be the freight forwarder, the purchaser, or a delivery point the purchaser designates. For the same reason, government bills of lading for working capital fund materiel must not cite the trust fund (FMR Vol. 15, Ch. 8, para. 7.3.1.2). Offices that process them must not accept one that does.

3. Carriers, mail and couriers

For carriers, the term covers commercial carriers and the working capital fund parts of Air Mobility Command and Military Sealift Command (FMR Vol. 15, Ch. 8, para. 7.3.1.1). Their bills for materiel other than inland moves of fund stock are supported by listings showing the transaction control numbers and case designators, or the articles moved for sales purchasers.

Smaller channels have their own rules. Postal costs collected as surcharges on purchaser bills are reimbursed directly to the implementing agency’s designated headquarters (FMR Vol. 15, Ch. 8, para. 7.3.1.3). The Defense Courier Service, and military post offices, are paid a prorated share based on sales shipments against total shipments (FMR Vol. 15, Ch. 8, para. 7.3.1.4 and FMR Vol. 15, Ch. 8, para. 7.3.1.5). Commercial package carrier costs collected as surcharges go straight back to the reporting components, not through the transportation account (FMR Vol. 15, Ch. 8, para. 7.3.1.6).

4. The organizations behind the move

Headquarters costs of the two transport commands are allocated by the ratio of sales billings to their total fund billings (FMR Vol. 15, Ch. 8, para. 7.3.2.1 and FMR Vol. 15, Ch. 8, para. 7.3.2.2). The bill includes a proportionate share of costs funded by operation and maintenance and military pay, and of certain unfunded costs.

Routing organizations bill on tonnage (FMR Vol. 15, Ch. 8, para. 7.3.2.3). They include the Surface Deployment and Distribution Command, the Navy Materiel Transportation Office and installation transportation offices. Their share rests on sales tonnage as a percentage of total tonnage moved, counting materiel moved through the Defense Transportation System and on commercial bills paid directly by foreign countries. Offices that account for and pay transportation bills charge by the number of sales bills of lading processed against the total (FMR Vol. 15, Ch. 8, para. 7.3.2.4).

Security is priced as labor. Shipments of sensitive conventional arms, ammunition and explosives in transit are handled under the Department’s physical security manual (FMR Vol. 15, Ch. 8, para. 7.3.2.5). The Department’s people who provide services on those shipments are priced under the personnel pricing rules for civilians and military members. How those rules work is covered in how personnel services are priced.

5. Troops and vehicles

Activities that use troop labor to load or unload vessels, trains, vans or other conveyances bill the applicable costs (FMR Vol. 15, Ch. 8, para. 7.3.3.1). The sales share may be based on a prorated share of the total cargo manifest or a similar document.

Use of the Department’s own vehicles is billed from motor pool records that show the vehicles moved sales materiel (FMR Vol. 15, Ch. 8, para. 7.3.3.2). The rate is $4.00 per mile, and it includes the labor of drivers assigned by the motor pool. Motor pool bills are consolidated by major command.

6. Packing, crating and handling

Packing, crating and handling is rarely billed as an actual cost (FMR Vol. 15, Ch. 8, para. 7.4). SF 1080 bills for it are normally not submitted. Instead, earned reimbursements are transferred to the shipping depot when the Defense Finance and Accounting Service applies the surcharge. Working capital fund items get no such reimbursement, because the charge is already in their standard price.

The purchaser sees the result on its bill. The surcharge is charged on shipments of materiel that is not managed by the working capital fund (FMR Vol. 15, Ch. 8, para. 5.3.2). For excess defense articles, the implementing agency calculates it on the materiel’s acquisition price.

Key terms

Government bill of lading (GBL)	The shipping document used to bill transport, which must not cite the trust fund for working capital fund materiel.
Below-the-line charge	A transportation charge applied as a percentage outside the priced lines of the case.
Above-the-line transport	A discrete cost, such as special airlift, charged to the case through the delivery transaction.
Transportation surcharge account	The account from which actual transportation bills are paid.
Organic vehicle rate	The $4.00 per mile charge for Department vehicles moving sales materiel, including drivers.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

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