When it comes to moving LTL freight, it’s important to know the differences between the 3 primary types of freight charges that you will encounter; collect, prepaid, and third-party.
The differences between these types of freight charges ultimately affect who to bill and when. Knowing and understanding the differences between these on your Bill of Lading (BOL) is not only useful, but it is also necessary when dealing with LTL freight. Understanding these terms can also help you better negotiate future contracts with carriers in order to ensure you’re getting your preferred terms before moving forward.
What is Collect Freight?
With collect freight, freight payment is made by the consignee. This person can either be the shipper or the receiver. All LTL charges and additional fees are the responsibility of the consignee. This type of freight charge is also sometimes called “Collect Upon Arrival” because it is handled at the time that the shipment arrives.
What is Prepaid Freight?
In the case of prepaid freight, the cosigner, otherwise known as the shipper, is responsible for all LTL freight charges and any additional charges added. This term is also sometimes known as “Prepaid & Add.”
What is Third Party Freight?
In the case of third-party freight, this means freight payment is neither the responsibility of the shipper or receiver, but falls to the responsibility of a third party, generally a logistics company. The involved logistics company is the one responsible in this case for all LTL and additional charges.
No matter which way the freight is billed, it will indicate on the Bill of Lading which freight terms are being used to give you a clear indication of who is responsible for billing purposes. Knowing and understanding the differences between collect freight, prepaid freight, and third-party freight can help you map your business decisions and make sure you’re partnering with carriers who use your preferred terms.