Freight Rate Explained
Types of Freight Charges
Freight transportation can often be viewed as just moving something from A to B. Unfortunately there are often specific freight charges that can effect the overall price you will pay. By knowing these specific charges you could save money on your transportation costs and also be able to make a more informed decision as to which type of freight suits your requirement. Any reputable freight forwarder should make you aware of these charges prior to taking any booking.
This is a very common method of freight charge. The consignee would pay for all the freight charges.
Consignee – This is generally the person/persons that are financially responsible for the receipt of the shipment. In most cases the consignee is the same as the receiver.
Prepay and Add
This method requires the shipper to pay for the freight and then charge the customer. If you are using a freight forwarder you will come to realise that due to the volumes they transport they often get access to the best shipping rates. At Ceramic Logistics we are heavily involved in the ceramics industry meaning we have access to the best freight rates from European carriers on any general or over stow cargo.
Rather than the shipper or consignee paying for the freight charges a third party will pay. The third party payer would therefore not be the shipper or consignee. For example a third party could be a freight forwarder.
Cash on Delivery (COD)
This type of freight charge is not very common any more with the advancement of online payments. In this instance payment is not collected until the cargo or goods are delivered. The carrier collects payment on delivery then forwards to the shipper.
Free on Board (FOB)
This basically means the cost of collecting and delivering the cargo or goods to the nearest port. You as the buyer are responsible for the shipping from this point.
There are 4 variations to FOB which you should be aware of:
1) FOB destination, freight prepaid and allowed
The seller/supplier is responsible for the payment of the freight and owns the goods while they are in transit. Title passes to the buyer at the given location.
2) FOB destination, freight prepaid and added
The seller/supplier will pay the freight charges but the bill will be forwarded to the customer/consignee. The seller would still own the goods while they are in transit.
3) FOB destination, freight collect
The buyer would pay the freight costs at time of receipt of the goods. The supplier would still own the goods while they are in transit.
4) FOB destination, freight collect and allowed
The buyer would be responsible for the freight costs, but deducts the freight costs from the supplier’s invoice. The seller still owns the goods while they are in transit.
CIF – Cost, Insurance and Freight
In this case, the price you pay will also include sea freight charges and insurance to deliver the goods to the nearest port. This is only to the port and from that point onwards you would become responsible for the shipment.
CNF – Cost & Freight (or Cost, no Insurance, Freight)
Carriage and freight. This is where the insurance is paid by the importer. The exporter would pay for all transport costs incurred when transporting the cargo from its place of origin to the port of the destination country.