Payment terms in shipping define who pays freight charges and when — the shipper, the consignee, or a third party. They appear on the bill of lading and shipping label and determine which account the carrier invoices for transportation costs.
Standard Payment Term Options
- Prepaid: Shipper pays freight charges. Most common for outbound shipments where the seller covers delivery cost.
- Freight Collect: Consignee pays upon delivery. Used when the buyer has their own carrier account or has agreed to bear freight cost.
- Third-Party Billing: A party other than the shipper or consignee is billed — common for 3PLs managing freight on behalf of clients.
Surcharges Associated with Payment Terms
Third-party billing typically triggers a third-party billing surcharge of 2–3.5% of the transportation charge. Some carriers also apply surcharges to freight collect shipments. When structuring shipping arrangements, account for these additional costs in total freight economics.