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One definition of freight cost is the price you spend to transfer products from one location to another, whether by land, sea, or air.

Freight Cost Definition

One definition of freight cost is the price you spend to transfer products from one location to another, whether by land, sea, or air. Many American firms rely on being able to acquire and sell items from enterprises in other nations. As a result, it is critical for firms to understand the many ways freight charges might be applied. They must also understand how freight is logged in order to avoid misunderstanding.

There are many expenses to consider when calculating the cost of shipping from the seller’s location to the buyer’s outlet. These are some examples:

Transportation to and from the departure point

Loading into the ship

Transport of goods via sea



Transportation to the final destination

With the rising demand for freight transportation, more firms are pricing their services based on freight density rather than weight. They do this because billing by weight restricts the quantity they can send and so makes it more costly, both financially and in terms of space. The higher the freight density, the less room it takes up on the transport vehicle. This reduces transportation expenses per pound sent.

Freight prices are governed by federal and state rules. These are intended to prevent customers from being overcharged.

Documents for Freight

When you send products, you will get two key papers from shippers or logistics companies: the freight bill and the bill of lading.

Your invoice is the freight bill. This may be used to pay the bill and keep track of it.

The bill of lading specifies the kind and amount of goods being transported. It denotes your consent with the shipper to carry these products. The bill of lading includes the weight, value, and description of each item as well as the shipment and delivery dates. Bills of lading may be used in court if required.

You should save these and any other shipping-related papers for many years. You will be better prepared in the future if you retain these records.

Freight Charge Varieties

In general, there are two methods to pay for goods transportation:

Pre-Paid Freight: The consignor pays the freight and owns it until the consignee gets it and pays the invoice.

Freight Collect: When the freight is delivered to the carrier, the consignee pays for it and takes control of it.

These costs may be described in a variety of ways on the bill of lading:

Consignee Collects: The consignee is responsible for paying freight costs as well as customs and any relevant taxes or other forms.

Prepay and Add: The consignor pays the freight, maybe receiving a better bargain than the consignee. The expense is subsequently passed on to the consignee by the consignor.

Third Party: The payment of freight costs is handled by a third party, generally a logistics business.

Cash on Delivery (COD): The consignee pays the carrier, who then pays the consigner.

Freight-on-Board (FOB) or Free-on-Board (FOB) (FOB) The consignee bears responsibility for the freight and pays all fees at the consignor’s pier.

FOB Origin, Freight Prepaid: The same as before, but that the consignor pays the freight expenses.

FOB Origin, Freight Prepaid, and Charged Back: Same as before, except that the consignor invoices the consignee for the freight expenses.

The title for goods passes at the consignee’s dock, FOB Destination. The consignor is responsible for freight expenses.

FOB Destination, Freight Collect: As mentioned before, only the consignee is responsible for freight expenses.

FOB Destination, Freight Collect, and Allowed: As before, except that the consignee deducts the freight expenses from the cosigner’s invoice.

The phrase “Freight on Board” does not indicate who owns the freight. It is an internationally recognised legal word that states that the consignor must carry the freight to the consignee by vessel.

It specifies the moment at which the consignor is no longer liable for the freight and the consignee is responsible for the shipping charges. In an ideal world, the consignor pays to have the freight delivered to a specified location. The expense of conveying the freight from that site to the retail store is subsequently borne by the consignee.

Who owns the freight is stated on the bill of lading. The conditions of sale specify who is responsible for the freight charges.