There are several notations/clauses that are used in a bill of lading and one such important notation relates to “Freight”..
Freight maybe defined as the price that is charged by a transport operator to transport cargo from Point A to Point B as per a mutually agreed contract..
Freight maybe paid at various places based on which the notation on the bill of lading will change.. Freight notations may read as below :
1) Freight Prepaid – Shipping line is certifying that the freight for the carriage of the cargo has been paid at the origin port
2) Freight Collect – Shipping line is certifying that the freight for the carriage of the cargo has to be paid at the destination port
3) Freight Payable at XXXXXXX – Shipping line is certifying that the freight for the carriage of the cargo has to be paid at a specified location, which could be different from the port of load or the port of discharge..
It is important that this notation is mentioned very clearly without any ambiguity on the bill of lading..
Reason is that while freight is commonly construed to be “ocean freight”, what the freight covers depends on what type of bill of lading has been issued, whether Port to Port, Combined Transport/Multi-Modal or Through Bill of Lading..
For example, if the shipping line issues a Combined Transport Bill of Lading whereby they undertake to move the cargo from Door to Door, and the bill of lading is claused Freight Prepaid, it could mean that the shipping line or its agent at origin has collected the full price for movement of this container from Shipper’s door to Receiver’s door..
If you look at a screen shot of a bill of lading issued, it shows very clearly what has been prepaid and this removes all ambiguity between the shipping line and the receiver..
If the freight terms are not made clear, then there could be delays at the time of delivery at destination and that could create additional charges such as demurrage and/or detention..
It could get a bit complicated when you consider the various options in freight in Master Bill of Lading and House Bill of Lading..
But once the concept is understood and the responsibilities about who pays for what in a shipment are made clear, then it should be fine..
The post has nicely clarified the importance of inclusion of ‘Freight clause’ in the B/L in clear terms so that there is no scope for any ambiguity of freight payment at destination. The responsibility basically lies with the shipping line issuing the B/L. Sometimes in case of issuance of switch B/L, the shipping line may agree to receive the freight in the place other than port of loading or discharge, if mutually agreed with shipper/exporter. Thanks.
Very Nice post, but this is the responsibility of liner, not the exporter. So I suggest every exporter to ask for draft B/L before final B/L copy. This will help exporter.