Understanding freight charges is vital for businesses engaged in international trade. From collect freight to prepaid freight and third-party freight, the diverse types of freight terms can significantly impact shipping costs and logistics.
Join us on a journey to unravel the complexities of freight charges and maximize your business’s shipping efficiency.
Prepaid Freight
Freight Prepaid, or “Prepaid & Add”, refers to the seller paying the freight charges to the logistics provider before shipping. He bears the cost and risk, assuming full responsibility for the shipping process. If the goods are damaged during shipping, you can have him contact the freight forwarder to handle compensation matters.
This payment method is suitable for import beginners who lack a network of freight forwarders and can not secure discounted rates. In addition, having the seller arrange transportation can save you time and reduce the risk associated with shipping.
Most Chinese sellers have long-term partnerships with freight forwarders, allowing them to obtain discounted freight rates. Additionally, freight prices are now relatively transparent, so you don’t need to worry about the seller profiting from it.
Incoterms related to “Freight Prepaid” are CFR, CIP, CPT, CIF, DAP, DPU, DDU and DDP.
Many of our clients choose CIF or DDU and DDP arrangements, relying on us to coordinate with freight forwarders for transportation. It is because we have built long-standing relationships with numerous Chinese freight forwarders, which enable us to negotiate competitive prices and favorable terms on behalf of our clients. Furthermore, we prioritize the safety and security of goods, actively ensuring that we handle them with the utmost care.
Collect Freight
Collect Freight, or “Collect Upon Arrival”, requires the buyer to pay the freight charges when the goods arrive at their destination. If the goods are damaged during shipping, you need to contact the freight forwarder directly to claim compensation for the losses.
This payment method is suitable for experienced importers who have reliable freight forwarders. They can leverage their freight resources to get better shipping rates. Many importers with large orders, especially those opting for long transit times such as sea freight (1 month or more), choose this payment method to manage their cash flow effectively.
Incoterms related to “Freight Collect” are EXW, FCA, FOB, and FAS.
You may have heard of two other terms, namely FOB Origin and FOB Destination. However, these are not commonly used.
FOB Origin means that the seller delivers the goods to the carrier and assumes the costs and risks until the goods are loaded. In practice, your seller will directly sign FOB terms with you.
FOB Destination means that the seller is responsible for shipping the goods to the buyer’s destination. The ownership and responsibility pass to the buyer when the goods arrive. In practice, if you want the goods to be delivered to the port in your country/region, the seller will sign CFR or CIF terms with you. If you want the goods to be delivered directly to your doorstep, it is actually DDP or DDU delivery terms.
Third-Party Freight
This refers to the method of shipping and paying for goods through third-party logistics. Compared to freight forwarders, 3PL companies can provide more services. They have warehouses to store, package, and deliver to end consumers. Some large freight forwarders may rent warehouses in destination countries and offer similar services to 3PLs.
Amazon FBA is actually a typical example of this model. Amazon sellers who want to focus on store marketing outsource their logistics to 3PL companies, which help with tasks like warehousing, collecting goods, and final delivery.
As a leading sourcing company in China, Jingsourcing has successfully helped 4000+ importers ship their products successfully. This is mainly due to the partnerships we have established with freight suppliers, so we can get competitive prices and favorable terms. Collect freight, prepaid freight, and third-party freight are all available.
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