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. In this blog post, we'll break down each type so you can better understand billing responsibilities and negotiate more favorable carrier contracts.
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.
Final Thoughts
No matter which way the freight is billed, it will indicate on the Bill of Lading which freight terms—including FOB designations—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.
FAQs
What is freight collect in LTL shipping?
Freight collect means the consignee is responsible for paying the freight charges. In LTL shipping, that includes the base transportation cost and any additional fees tied to the shipment. This arrangement is also called “collect upon arrival” because payment is handled when the freight reaches its destination.
Who pays freight collect charges on a Bill of Lading?
With freight collect, the consignee pays the charges listed on the Bill of Lading. The consignee can be either the shipper or the receiver, depending on how the shipment is set up. The BOL is the document that shows which party is responsible for billing and freight terms.
What is the difference between freight collect and freight prepaid?
The main difference is who pays. With freight collect, the consignee pays the LTL charges and any extra fees. With freight prepaid, the shipper—or cosigner—is responsible for those costs. Both terms should be clearly shown on the Bill of Lading so billing responsibility is easy to identify.
What does freight prepaid mean?
Freight prepaid means the shipper, also called the cosigner, pays all LTL freight charges and any additional charges that apply. This term is also known as “Prepaid & Add.” It is the opposite of freight collect, where the consignee is the party responsible for payment.
What is third-party freight payment?
Third-party freight means neither the shipper nor the receiver pays the freight charges. Instead, a third party, usually a logistics company, is responsible for the LTL charges and any additional fees. This setup shifts billing responsibility to an outside payer named in the shipment terms.
Where can you tell whether a shipment is freight collect, prepaid, or third-party?
You can tell from the Bill of Lading. The BOL identifies the freight terms being used, including collect, prepaid, third-party, and FOB designations that show who is responsible for billing. Checking these terms before the shipment moves helps avoid confusion about payment responsibility.
Why does understanding freight collect and prepaid terms matter when negotiating carrier contracts?
Understanding freight collect and freight prepaid terms helps you negotiate carrier contracts with your preferred billing setup. These terms determine who pays, when payment happens, and how charges are assigned on LTL shipments. Clear terms on the BOL and in carrier agreements reduce billing confusion and support better contract decisions.
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