Cash on delivery (COD) is a payment method in which the consignee pays for goods at the time of delivery — the carrier collects payment and remits it to the shipper. COD was historically common in B2C retail before widespread credit card adoption. In modern B2B shipping, COD remains used in specific contexts where the seller requires payment before releasing goods to the buyer’s possession, or when selling to cash-based businesses.
How COD Works in Practice
The shipper declares COD instructions on the bill of lading or shipping label, specifying the amount to collect and acceptable payment forms (check, money order, or cash). The delivering carrier collects the specified amount from the consignee and sends a check to the shipper. Carriers charge a COD fee (typically $10–$30+ per shipment) for this service, plus the underlying freight charges.
COD Risk Considerations
COD protects the seller from non-payment risk on the specific shipment, but the seller cannot control whether the consignee refuses delivery — in which case the goods are returned and the seller incurs return freight costs. For regular B2B transactions, establishing credit terms or using electronic payment at order is typically more efficient than COD for both parties.