Shipping freight has its own lexicon. It's full of confusing acronyms and jargon. In the shipping business, many of the terms describe details of a purchase, such as who will bear the cost of freight. Many other freight terms describe precisely when and where the ownership of goods changes hands. As in other businesses, a lot of terms are simply used as shorthand, quickly conveying familiar concepts for the convenience of shippers who use them daily.
Purchase terms have to do with contract details. Two common purchase terms relating to shipping are "FOB origin" and "FOB destination." FOB means free on board. Free on board means that freight shipped to a specified destination has been paid for as part of the purchase. It can also mean that ownership of the item does not contractually change until the freight is delivered to the specified place. FOB origin means the consignee is taking ownership prior to shipping and is responsible for freight payments.
Simplified Freight Terms
Because FOB origin and destination aren't very intuitive, there are some simpler terms. These terms are more often used by parcel shippers than shippers of large freight. "Door to port" can be used to mean "FOB destination." Also, "door to door" is sometimes used to mean an object will be shipped directly to your location, not a shipping center or port.
Terminology of Freight Terms
Many freight terms refer to who pays for the freight. If an item is "prepaid," the shipper must pay the freight fee; if an item is "collect," the consignee (party receiving the freight) must pay the freight fee. The term "prepaid/collect beyond" indicates that the shipper will pay the freight to a certain destination; then, the freight becomes the consignee's responsibility. "Prepay and add" is a term that means the shipper pays the freight company in advance, then bills the consignor the actual freight charge.
Bills of Lading
Bills of lading function as contracts for the shipment of the freight. They also function as freight receipts. Uniform bills of lading follow the same format. Terms and conditions of the sale and freight are printed on bills of lading.
What Does the Term Drop Ship Mean?
Whether you already operate an Internet retail business or are considering starting one, being able to drop ship merchandise to your customers...
What Does FOB Mean in Freight?
FOB stands for "free on board" or "freight on board." The shipping terms that follow "FOB" dictate who pays for shipping and...
Definition of Freight Charges
Freight charges are the costs incurred for shipping products from the producer or distributor to a customer or client. In some cases,...
What Does ARO Mean for the Terms of a Payment?
The terms of payment lay out the payment conditions for a purchase. These terms can include abbreviations that may be unclear, such...
How to Measure for Interior Doors
Whether you are measuring for the framing of an interior door or looking to replace your existing door with one the same...
Accounting & Shipping Terms
When businesses purchase merchandise and goods, every order includes shipping terms. Shipping terms simply state who pays for the transportation costs of...
What are CFR Shipping Terms?
Cost and Freight (CFR) is an internationally accepted shipping term used in contracts to define the rights and responsibilities of the seller/shipper...
Freight Classifications: Truck
The National Motor Freight Traffic Association (NMFTA) investigates, initiates and considers the classification of commodities, commodity descriptions, classes, rules, packaging definitions and...