Imagine shipping freight from Phoenix to Seattle or from Atlanta to Phoenix. The first shipment would cost $680 for 1,425 miles, while the latter only $470 for 1,845 miles. Customers and even new shipping companies may have trouble understanding the pricing discrepancies without a proper freight charges and freight fees guide.
Every freight shipping agreement uses industry terms that indicate how the fees are split between the parties involved. That and the quote breakdown are crucial for determining the most beneficial terms for all parties.
Understanding the Bill of Lading and Freight Bill
When it comes to freight shipping, two terms are often misunderstood – bill of lading and freight bill. Clarifying the differences is crucial to ensuring a safe and professional shipping process.
A bill of lading serves multiple purposes. Firstly, it acts as a receipt for the freight services. Secondly, it serves as a contract between shippers and carriers. And lastly, it’s a title document, often issued by the shipping company.
Drivers can look at the bill of lading for information on handling their freight cargo. They can see the weight, value, and descriptions of all items.
Moreover, a bill of lading is a legally binding document. Both customers and freight companies agree that the information provided in the bill of lading is correct. Should any disputes be issued by either party, the bill of lading agreement is used as a reference.
On the other hand, freight bills are quite different. Firstly, you can’t use a freight bill in legal disputes. But you can use a freight bill or invoice to examine shipping records and methods.
The two documents are easily confused because they look similar. However, the freight bill usually contains more information regarding freight charges and can shed light on various items listed in the bill of lading.
Hence, it serves more as an auditing document for the logistics process. But it’s not legally binding like the bill of lading. You can find out even more about how a bill of lading impacts your shipping process from a1autotransport.com
Freight Charges You May See in These Documents
Some freight chargers are no-brainers. But others aren’t as easily understood without further explanation. To clarify a bill of lading and freight bill, here are a few examples of freight charges you may encounter.
Consignee Collects
These charges refer to payments for which the buyer (consignee) is responsible during a delivery. For example, it may include customs taxes for international shipping.
FOB Origin
A FOD or Free On Board is a freight charge used in shipping processes where buyers or suppliers agree to cover all the transportation costs. This often includes insurance and shipping costs from a pickup spot or manufacturing site to a prearranged location.
FOB Destination
This charge appears when the shipper pays all freight charges before shipping the goods.
FOB Origin, Prepaid, and Charged Back
Another common freight charge, primarily encountered in commercial shipping agreements, splits the financial responsibilities between the parties involved.
For instance, the buyer is designated responsible for the freight. But the shipper assumes the responsibility of paying for the freight bill. In addition, the shipper will also invoice freight expenses to the buyer or consignee.
FOB Origin & Freight Prepaid
Someone looking at freight charges for the first time may not see any differences between this charge and the standard FOB Origin charge. Nevertheless, this variation shifts some of the payment responsibilities around.
For instance, the buyer or consignee is responsible for the freight. In contrast, the shipper agrees to pay all of the cargo expenses for the freight delivery.
FOB Destination & Freight Collect
This freight charge implies that the title of goods goes to the buyer under the Free on Board Destination. But all parties pay freight fees.
A variation of this is called FOB Destination, Freight Collect, & Allowed. The agreement sees the buyer receiving title to the goods and makes them responsible for paying the freight costs. However, the buyer can deduct these freight charges from the invoice issued by the seller.
Third-Party Charges
Seeing third-party charges may seem confusing at times. But using a third-party organization or a logistics company can be beneficial.
The third-party charge means that another designated entity is responsible for paying freight charges for the shipper, customer, or both.
It’s one of the best freight shipping provisions to use for first-time customers or on intricate freight orders.
Prepay and Add
A prepay and add charge almost always favors the customer or buyer. The agreement makes the shipper pay for freight and collect costs from the customer later. Essentially, this empowers the shipper to negotiate terms with all other parties involved.
In theory, an experienced shipper can get better deals and save the customer money. But this type of agreement requires mutual trust and works better in long-term shipper-client relationships.
On Delivery
A cash-on-delivery freight charge can incur additional costs. Here’s how it works.
Carriers collect freight charges after making the delivery. Then they invoice the shipper to get reimbursed. But the process simplifies the logistics for shippers. Therefore, they may have to pay an added cost for the perk.
What Affects Freight Charges
Aside from the terms themselves, other factors influence charges and how much everyone is responsible for paying:
- Fuel cost
- Incidents
- Insurance premiums
- State rules and regulations
- Customer demand
- Cargo weight
- Distance
Determining Freight Charges Is an Intricate Science
Every freight operator, shipper, and carrier can use their own formulas to determine the cost of moving cargo from point A to B. But the process is more complex than most people think due to the many considerations and types of freight charges to account for.
Becoming more familiar with industry terminology and differentiating between a bill of lading and a freight bill makes it easier to understand how to get a better deal on freight shipments.
When in doubt, you can always defer to professionals to oversee the entire process and work out the most cost-effective solution for moving heavy cargo nationally and internationally.
