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Freight Shipment COD versus Freight Collect

November 14, 2020
5 min read
Less Than Truckload
Transportation Management
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In the freight shipping world, the terms “COD” and “Collect” sound pretty interchangeable, right? However, there are crucial distinctions between the two that can significantly affect shipment outcomes. Forewarned is forearmed!

Freight Shipment COD Defined

Freight shipment COD means “Collect on Delivery” or “Cash on Delivery” and typically refers to payment for the goods being shipped, not the actual freight charges. However, sometimes the cost of freight is included in the total. The point here is that with shipment COD, it’s always the GOODS being paid for, with or without shipping charges included. As indicated in the bill of lading, these COD charges let the delivery person know to collect payment from the receiver/consignee of the freight in cash, a company check, or certified funds and then send the payment back to the seller.

This method can work reasonably well when a buyer wants to pay upon delivery, and a shipper prefers to deliver once the goods have been paid in full. However, the high shipment COD fees charged by many carriers – particularly LTL – for the inconvenience and added responsibility on their end can be discouraging.

What is Freight Collect?

Although it sounds as if it would mean collecting for the freight, Freight Collect is the appropriate term to use when the consignee is responsible for ONLY the freight shipping charges according to the terms they’ve agreed upon with the carrier. And in contrast to Freight shipment COD, the driver isn’t always responsible for collecting the funds from the receiver.

What about when the shipper pays freight costs?

It’s easy enough to determine when the shipper will be covering the freight charges – “Freight Prepaid” is indicated on the bill of lading to show the shipper’s responsibility to honor the carrier’s payment terms, even if the prepayment isn’t literal.

The third option is when neither the shipper nor the receiver is responsible for freight charge costs. In this case, the billing party responsible, along with “Third Party Billing,” would be detailed on the bill of lading.

A Final Note…

In the realm of freight shipping, it’s clear that an ounce of prevention (knowledge) can be worth a pound of cure (correcting under or overpayment and the accompanying frustration and time delays!) Whether you’re shipping LTL, FTL, or partial truckload, Amware can help. Click below to request a free trial of Amrate 7.0 – Amware’s cutting edge cloud-based TMS. Clients using Amrate save, on average, 30% on LTL annually.

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