10 Different Types of Freight Charges

Protect Your Business By Understanding Different Freight Charges

When shipping products across the country or overseas, it's essential to be familiar with certain documents and types of charges to prevent confusion and losses for your company.

Bills of Lading vs. Freight Bill

One of the most important terms in shipping is the bills of lading. Bills of lading are official documents, sometimes used in the court of law, that names the type of item and the number of items being transported. This is provided by the shipping company or a third-party logistics company. The Bills of lading need to outline the weight, value and description of every item. It also covers when the units will be shipped and delivered. It is an agreement between you and the shipper. 

Another common item is the freight bill, which some people confuse with a bill of lading. Unlike the bills of lading, a freight bill is not considered usable as evidence if there's a legal dispute. They are more commonly used as invoices when you're auditing shipping practices and evaluating the accuracy of your records. 

All of the documents should be recorded and stored for several years in case of a future issue. 

Below are common charges that may be outlined in bills of lading or freight bills:

Consignee Collects

Trucks in queue at shipping terminal, Port of Los Angeles, California, United States
Tom Paiva Photography/Blend Images/Getty Images

The consignee, typically the buyer who the freight will be delivered to, pays all freight charges upon receipt. The consignee is considered responsible for customs declarations and filing any taxes or forms. 

Prepay and Add

The shipper pays for freight and then charges the customer. This is a good option when the shipper and carrier have a relationship and therefore good rates. The shipper can often negotiate better deals than the customer could do on his own. 

Third Party

A third party, typically a professional logistics company, pays all freight charges rather than the shipper or consignee. This is a valuable option when the order is more complicated or the consignee is new to the business. 

Cash on Delivery (COD)

The carrier collects payment at the time of delivery and then forwards to the shipper to be reimbursed. The carrier usually charges an additional fee for this service. 

Free-on-Board (FOB) Origin

The FOB is the moment when the seller gives up their rights to the merchandise and the buyer accepts ownership during an exchange. In a FOB charging situation, the freight becomes the responsibility of the consignees at the shipper's dock and the consignee pays all of the associated costs. 

FOB Origin, Freight Prepaid

Freight becomes the responsibility of the consignees at the shipper's dock. The shipper pays all freight charges.

FOB Origin, Freight Prepaid and Charged Back

The freight becomes the responsibility of the consignee at the shipper's dock. The shipper pays all freight charges and then invoices the consignee for the freight charges.

FOB Destination

The title for goods passes at the consignee's dock and the shipper pays all freight charges. The freight is shipped prepaid.

FOB Destination, Freight Collect

The title for goods passes at the consignee dock and the consignee pays all freight charges.

FOB Destination, Freight Collect and Allowed

The title for goods passes at the consignee dock and the consignee pays the carrier's freight charges and then deducts the freight charges from the seller's invoice for the goods.