Prepaid Freight

Posted in Operations and Supply Chain Terms, Total Reads: 148

Definition: Prepaid Freight

Prepaid freight refers to the bill of lading. The phrase is usually used to indicate that the cost of shipping of the goods has been paid for in advance. Such cost is usually non-refundable. Many manufacturers ship their products with freight paid in advance in order to avoid the receiver from paying the shipping cost of the goods sent.

Prepaid freight also refers to the air or ocean freight charges that are paid at the port of origin of goods or the port of loading and are billed to the importer in the exporter’s invoice. Such charges are also non-refundable. Even if the shipment fails and the goods fail to arrive at the destination even then such charges are not refunded.

In case when freight is prepaid all the charges are prepaid except the terminal handling charges, the terminal destination related charges and the land freight related charges. If such charges have been mentioned explicitly in a shipping contract only then are they treated as prepaid.

Thus, whatever may be the mode of transport of goods, if the transportation charges for the goods are paid in advance by the seller of the goods while sending off the goods to the buyer’s destination, such charges paid in advance by the seller are called as prepaid freight.



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