Freight prepaid - is a concept that we can more often find in air and sea shipments. It is an advance payment for the goods, which means that the seller is responsible for the freight charges. It is in close relationship with incoterms, which define the obligations of the parties regarding the transport of goods from seller (shipper) to receiver (buyer).
The Freight Definition
Freight means the goods or the products being transported by land, water or air. It also means the payment for the carriage of goods (or passengers) in air and sea shipments. Initially, (starting from the 17th century) the term used only in the context of maritime transportation. But now the term freight is used with new modes of transport like trains, cars, and airplanes. An important nuance: freight refers to the payment of only large quantities of goods that are transported over long distances.
The incoterms (International Commercial Terms) are the world's standard term published by the International Chamber of Commerce (ICC) in 1936. “The incoterms 2010” constitute a set of 11 rules, which define the delivery method, the conditions of export and import and the risks and the costs of transactions between the seller and the buyer.
Incoterms related to Freight Prepaid:
- F.O.B. (Free On Board) Origin, Freight Prepaid: this term means that the seller maintains the responsibility for the cost of shipping, but the buyer takes ownership and assumes liability for goods at the time of carrier loaded.
- C.P.T. (Carriage Paid To): this term means that the seller is responsible for the cost of shipping and risks that related to transportation of goods to a carrier of the destination country.
- C.I.P. (Carriage and Insurance Paid): this term means that the shipper pays for the freight and the insurance that covers the risk of damage or loss to the goods delivered to the carrier at an agreed location.
- C.I.F. (Cost, Insurance and Freight) : this term means that the shipper is responsible for the freight and the costs of transportation to the port of destination and also contracts for insurance to deliver goods.
- C.F.R. (Cost and Freight): this term means that the seller pays for the freight and the costs of shipping to the named location. The risk is transferred to the receiver at the time of unloaded.
- F.O.B. (Free On Board) Destination, Freight Prepaid: this term means that the seller pays for the cost of shipping and takes responsibility for the transportation of goods.
- D.A.T. (Delivered at Terminal): this term means that the seller is responsible for the transportation costs of goods and unloading them in the indicated place.
- D.A.P. (Delivered at Place): this term means that the shipper takes responsibility for arranging delivery and for transportation of goods, ready for unloading in the indicated place of destination.
- D.D.P. (Delivered Duty Paid): this term means that the seller delivers the goods at an agreed location and pays all duties including import. But the seller is not responsible for unloading.
- David A. Glass, (2012), Freight Forwarding and Multi Modal Transport Contracts Informa Law from Routledge, Abingdon.
- Incoterms® 2010, "International Chamber of Commerce" (2019).
- International Projects, Inc., (2010), Incoterms for Americans. "Seminar Notes" , Toledo.
- The Incoterms rules, (2019).
- The World Trade Press Illustrated Guide to Incoterms 2010, (2010),Incoterms 2010, "Professional Industry Report".
Author: Viktoryia Yunik