Thus, Freight Prepaid usually means that the cost of shipping has been already paid. On the other hand, if it’s Freight Prepaid with FOB Destination, the seller is not only responsible for the safety and cost of the shipment until delivery but also maintains the ownership of the goods during the shipping process. To understand the terms Freight Collect and Freight Prepaid, we need to understand the concepts of FOB Origin and FOB Destination, with which these terms can be used.įreight Prepaid with FOB Origin means that the seller is responsible for the safety and cost of the shipment during the course of shipping, while the ownership of the shipment passes to the buyer when the goods are physically taken by the carrier. Read on to understand how either arrangement can be accommodated in a FOB (Free On Board) agreement. Freight Prepaid is the agreement in case of incoterms such as C&F, CIF, CFR, DDU, whereas Freight Collect is seen in the case of EXW and FOB. The freight, in this case, is essentially the cost of international shipping, which can be sea fare or airfare. Whether the freight charges are borne by the buyer (or importer) or the seller (or exporter) is clearly outlined in the relevant incoterm under which the import transaction in taking place. These charges, along with any other ancillary expenses, are also referred to as ‘Prepaid & add’. Similarly, Freight Prepaid denotes that the shipping charges are the responsibility of the shipper or consignor. It is also called ‘Collect upon Arrival’, and it implies that shipping, as well as additional charges, are the responsibility of the shipment receiver. In simple terms, Freight Collect means that the consignee or receiver is responsible for the freight charges. Either can be used to denote the responsibility of the freight expenses of international trade. Freight Collect and Freight Prepaid are both export/import-related freight arrangements.
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