“Freight Collect” & “Freight Prepaid” are two shipping terms, which show whether a consignee has the primary liability to the carrier for the shipping charges in a procurement process. EXW, FCA, FOB, FAS, etc Incoterm used for “Freight Collect” shipment. Now, we would like to discuss Incoterm which can be used for different “Freight Prepaid” shipments based on Incoterm of Sept 2019 published by ICC, also called 2020 amendment of incoterm.
Keywords: International Procurement, Freight Prepaid, Freight collect, Incoterm, ICC, Amendment 2020.
Transportation is one of the Drivers of the Supply Chain. The term Freight denotes transportation charges. The International Commercial Terms or INCOTERMS refers to whether the shipper/consignee is responsible to pay the freight or transportation charges.
Following things are the most common things to consider in freight terms:
Costs – Who pays the freight costs for each leg of transit?
Risk – Who covers insurance and/or is responsible if the goods are damaged in transit?
Taxes & Fees – For international shipments, who covers any customs duty or taxes?
Title – Who owns or has title to the goods? The title is not necessarily indicated by the shipping terms and can be noted separately on the commercial document.
“Freight Collect” & “Freight Prepaid” are two shipping terms, which show whether a consignee has the primary liability to the carrier for the shipping charges in a procurement process. If it is a “Freight Prepaid” shipment, then the carrier is supposed to invoice to a shipper for the transportation charges. Conversely, if it is a “Freight Collect” shipment, the carrier is supposed to invoice the consignee. The Incoterms CFR, CIF, CPT, CIP, DPU, DAP, DDP require repayment of the cost of the main carriage or shipping cost by seller/shipper. EXW, FCA, FOB, FAS, etc Incoterms are used for “Freight Collect” shipment. Now, we would like to discuss incoterms that can run for different types of “Freight Prepaid” shipments based on Incoterms 2010 published by ICC.