What Are Freight Terms?
Freight terms imply the delivery terms between a shipper and a carrier or forwarder. They commonly include details such as the type of shipment, the port of origin and destination, the route of transit, the method of payment, and the insurance requirements. Freight terms are important because they help to ensure the timely and secure delivery of goods.
Significance of Freight Terms in E-commerce and Logistics
Freight terms define the rights and responsibilities of the parties involved in an e-commerce and logistics transaction. Let’s examine how it is beneficial.
- They help set out the rules and regulations related to a shipment’s pricing, delivery, payment, and other aspects.
- They enhance smooth functioning and successful completion of the transaction.
- They help reduce misunderstandings between the parties involved and ensure that all parties know their obligations.
- Freight terms protect the interests of both the buyer and the seller in case of a dispute.
Prerequisites of Freight Terms and How it Works
Here is how freight terms work.
- Defining the terms of the sale: These terms must be clearly defined in the contract between the buyer and seller.
- Understanding of the Incoterm System: The Incoterms (International Commercial Terms) system is a set of predefined trade terms used in international sale contracts to define the responsibilities of buyers and sellers.
- Estimating freight costs: Freight costs can vary depending on the mode of transport, the distance to be traveled, and the volume or weight of the goods.
Use Cases of Freight Terms
A company that manufactures and ships furniture may have freight terms and conditions dictating who is responsible for the cost and risk of damage or loss during shipping. For example, the company may state that they are responsible for the same. Freight terms help the company and the customer understand their responsibilities in the event of damage or loss during shipping.