Paying to ship your goods and products around the world is the cost of doing business, but do you understand why you’re paying the amount that you do? Of course, there are several factors that determine how much you’re charged, from the size of the shipments to the time of year. However, one of the most important factors is the variety of freight rates your shipper charges you. Knowing the different types of freight charges and what influences them is a critical component of getting the most out of your supply chain. Without knowing why you’re charged a certain amount, you could find yourself spending more than you need, which could hurt your bottom line. To help you make sense of what you see on your invoices and bills of lading, here are the most common types of freight rates.
COMMON TYPES OF FREIGHT CHARGES
- Consignee collects: The consignee, or recipient, of the freight pays for all charges upon receipt. This also means the consignee is responsible for any taxes or customs declarations associated with the shipment.
- Prepay and add: Under this arrangement, the shipper is the one responsible for paying and charges the customer for reimbursement.
- Third party: The 3PL provider, or another party, pays for all freight charges, instead of the shipper or consignee.
- Cash on delivery: A COD payment means the carrier collects payment from the consignee at the time of delivery. This is then forwarded to the shipper and usually comes with an additional fee from the carrier.
- Free-on-board (FOB) origin: This is when the consignee or buyer accepts ownership of the shipment at the shipper’s dock. At this time, the consignee pays for all associated costs.
- FOB origin, freight prepaid: The shipper pays all freight charges once the shipment becomes the consignee’s responsibility at the shipper’s dock.
- FOB origin, freight prepaid and charged back: This is the same as the previous type of freight charge, only the shipper invoices the consignee for the costs.
- FOB destination, freight collect: In this setup, the title for the shipment is passed to the consignee at the consignee’s dock, with the consignee paying all freight charges.
- FOB destination, freight collect and allowed: This is similar to the previous example, only the consignee deducts the freight costs from the seller’s invoices for the shipment.
EXPERIENCE THE WSI DIFFERENCE
As you can see, there are many types of freight terms, and it can be confusing to keep track of them all. This is why turning to a 3PL partner to handle all aspects of your transportation and shipping can make life easier for you. With more than 50 years of experience simplifying the supply chain for customers across multiple sectors, WSI can be your full-service resource for all your logistical needs. To learn more about what we can do for your business, get in touch with us today.