Freight Prepaid
The term “Freight Prepaid” describes the opposite of “Freight Collect,” which is a commitment to assume the transportation costs of the shipper of the goods in question.
Brief description
“Freight Prepaid” is a concept we can most often encounter in sea and air transportation. It is in close relationship with the delivery clauses (Incoterms) and defines the shipper as paying for the freight. Which party to the commercial transaction will ultimately bear the cost for the freight will be decided by the agreed Incoterms. Corresponding to the “Freight Prepaid” delivery clause, we have either CIF or CPT, since in these cases the shipper of the goods in question pays the cost of the freight run.
Normally, the costs in this situation are initially borne by the shipper, however, they will be included in the bill as a separate item (transportation costs) or will also be included in the products and transferred to the recipient. Since, as a rule, they are charged to the shipper, he is also obliged to designate the type of transportation and the carrier.