There are only a few options; Collect, Prepaid and Third Party. So how come shippers can’t seem to get it straight.
Well, reality is, depends on who is creating the Bill of Lading. Along with the Origin and Destination, density and Freight Class, Freight Terms are a key ingredient.
Freight Terms define where the carrier is supposed to send the bill:
- When you want the consignee to receive the bill on their account, ship it Freight Collect!
- When you are shipping something and you want the carrier to send you the bill on your account… ship it Freight Prepaid!
- When you are shipping something and neither your firm, nor the consignee should receive the bill… ship it THIRD PARTY!
- A Freight Broker uses Third Party because they want the bill to come to them, on their contracted rates.
- Another use of Third Party Freight Terms would be a drop shipment. Say you want your vendor to drop ship to your customer; you would ask your Vendor so ship to your customer with Third Party Freight Terms with bill coming to you.
That’s what is supposed to happen, but what happens when it doesn’t?… A nightmare, right? You tell your vendor to ship to your customer using Third Party Freight Terms… but… stuck in their normal routine, they don’t! They ship like they always do to you… Freight Collect.
Surprise Mr. Customer, you thought you were going to pay $350 for freight paid to your wonderful vendor, but since you don’t have pricing with XYZ Carrier who was instructed Freight Collect (bill the consignee), you get a bill for $1350! No pricing with an LTL carrier means you get hammered!
Can it get fixed? Sure… but have you ever had to change a BOL? There’s a fee for that. And how quickly will that happen? As you can imagine, this is a problem your Customer Service and your client’s A/P department will be talking about for weeks.
Ask a Freight Broker about their clients using the wrong BOL? The one they prepa
red on their own… same deal… shipment goes out Collect or Prepaid when it should have been Third Party and boom! … someone gets a surprise… a big fat $1350!