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In this article we will cover prepaid & add and collect billing terms, along with their relationship to lớn FOB và INCOTERMS.
Definition of Prepaid & Add
Prepaid và add, often designated as PPD và add, is when the consignor or shipper, pays the freight bill for the shipment it is moving for its customer, then charges its customer after delivery.
Prepaid and add invoices are typically rolled up into the invoice the customer receives for the goods it purchases.
Important Aspects of Prepaid & Add Freight Billing:There is typically a hefty mark-up of profit on the charge.The management of inbound freight flows is known as Inbound Freight Management.
Because of the positive impact a company can obtain on its cost and service supply chain components, we recommkết thúc reading the following articles for a deep dive inlớn the topic of Inbound Freight Management.
Definition of Collect
It is important khổng lồ note that the freight provider will not release the goods khổng lồ the receiver until they are paid for the shipment and ancillary charges associated with moving the freight on their behalf.
Definition of Third Party Billing (TPB)
Neither the shipper or consignee is responsible for paying the invoice. Instead, a third party is responsible for the bill associated with the freight load.
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Confusion on Billing Terms & Ownership Terms
An important point khổng lồ make before closing out the concept of freight billing is the billing does not determine when the goods within a shipment pass ownership from the seller to the buyer. All prepaid và add and collect indicate is when the freight invoice is to be paid.
Definition of FOB và INCOTERMS
INCOTERMS and FOB (Freight on Board) terms determine when title of goods is transfer, liability, risks, costs, & ownership of goods transfers from the seller to lớn the buyer.
So, under FOB terms, a shipment can be either FOB prepaid và Add or Collect. Typically FOB is either FOB Origin or FOB Destination, where FOB Origin indicates the buyer takes ownership & all liability at the point of origin, while FOB Destination indicates the buyer takes ownership once they sign for it at their receiving dochồng.
Over time the majority of the supply chain industry has moved away from FOB to lớn INCOTERMS because of the confusion FOB often brought inkhổng lồ the buyer - vendor relationship, although you will still find some use FOB terms.
Like FOB terms, INCOTERMS set the cost division and liability of both parties involved in the international transaction, but with greater detail. Keep in mind, INCOTERMS highlight the process of the goods moving from buyer to seller, not the legal terms of a contract or property rights.
The International Chamber of Commerce (ICC) is the governing toàn thân that publishes the INCOTERMS and are updated every ten years.
For more on INCOTERMS, we recommend reading “Overview of Incoterms Defined”.
A listing of the INCOTERMS are provided below.
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