What is Freight Collection and how can it help you?

What is Freight Collect? 

The term ‘freight collect’ means that the freight charges are billed to the consignee or the person receiving the shipment. The consignor, or the person shipping the goods, is not responsible for paying the freight charges. Instead, payment terms are negotiated between the two companies and reflected in the purchase order or shipping document.

The opposite of freight collect is freight pre-paid. In this payment term, the consignor is responsible for freight charges, and the costs are included in the price of the goods.

Typically, freight collect can also benefit shippers by controlling their shipping schedule and improving cash flow as payments are received after goods delivery instead of before.

The biggest lovers of freight collect are often large volume businesses and shipments to different states or countries.

What are the Key Freight Terms?

The language surrounding freight can be confusing, so let’s stop for a sec and go through a few of the key terms you need to know to understand what’s going on. 

  • Terms of Sale 

Terms of sale are essential because they indicate the relationship between your company and its customer. The terms of sale explain how the business is conducted, including payment terms, returns policies, warranties, liability limits, shipping costs, and order delivery dates. Terms of sales should be included in contracts with your customers or in your invoice forms if you don't have contracts. The terms detail each party's obligations.

  • FOB

FOB means the title of goods passes to the buyer when the goods are loaded on the vehicle. The buyer is then responsible for all costs and risks associated with the shipment until it arrives at its final destination. Freight prepaid is almost similar to FOB, except the buyer pays the freight charges before the goods shipment.

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