When “Prepaid Freight” Isn’t Fully Prepaid

International freight charges, for any mode of transportation, can generally be “prepaid” or “collect”.  “Prepaid” charges are normally paid by the shipper, while “collect” charges are normally billed to the consignee, who must pay these charges before the shipment can be released at destination. 

The terms of sale for the goods will usually specify which parts of the transportation charges are paid by the shipper, and which parts are paid by the consignee.  The actual total cost of the transportation is normally the same, regardless of how the responsibility for payment is split between the shipper and consignee.

Many importers buy goods from foreign suppliers whose quoted prices may include “prepaid” international freight charges.  This is especially common with Chinese suppliers of machinery and equipment, but can be encountered with any type of goods, from any origin. 

For many buyers, this can be a useful means of identifying their shipping costs up front, as part of their business cost planning.  However, the “prepaid freight charges” included in the seller’s invoice usually do not include all of the shipment’s transportation-related charges – and can often include less than half of those total charges.

When freight charges are prepaid by the shipper, those charges typically include freight from the origin port, to the importing air or ocean carrier’s terminal at the destination port.  For ocean freight, this is often referred to as the “main ocean freight”, and traditionally covers cargo movement to “ship’s rail” at the port of discharge.  Many ocean carriers also charge a separate destination “terminal handling charge” (THC) to cover the cost of moving the cargo off the vessel, to a “place of rest” on the marine terminal at the port of discharge.  This charge is usually billed by the ocean carrier as a “collect” charge, to the consignee of a full container shipment. 

For full container ocean import shipments that are not moving on a “door delivery” basis, the consignee (or the consignee’s customs broker) will also be responsible for arranging – and paying for – container drayage to the final destination warehouse or other facility.

For “prepaid” air cargo shipments, the importing air carrier (or its cargo ground handling agent) usually bills an “import service charge” (ISC) as a “collect” charge to the consignee.  The ISC amount varies from one carrier (or agent) to another, but is typically in the range of $50 to $95 per air cargo shipment.

For “prepaid” consolidated ocean cargo shipments, where cargo from several shippers is loaded into a single marine container by a “consolidator” at the port of origin, there are a few additional steps to the process.  These steps begin with the consolidator’s destination office or agent arranging the movement of the consolidated container from the ocean carrier’s marine terminal to the destination Container Freight Station (CFS) selected by the consolidator or its agent. 

The costs incurred in getting the container from the marine terminal to the destination CFS, and getting the cargo in that container unloaded at the CFS for availability to individual consignees, typically include:

  * destination THC for moving consolidator’s container from vessel to a “place of rest” on the marine terminal

  * trucking charge to dray container from marine terminal to destination CFS

  * chassis charge

  * any charges for cargo examinations required by US Customs or other Federal agencies

  * any charges for “excess driver standby time” due to congestion or delay at terminal

  * CFS unloading and handling charges

The consolidator’s destination office or agent normally bills a pro rata share of these charges, along with a “document transfer fee” or “handling fee” and other miscellaneous charges, as a “collect” charge to each consignee.  This list of “collect” charges is commonly included on the shipment arrival notice sent to the consignee.  Occasionally, some charges incurred at origin but not paid by the shipper may also be included as part of these collect charges.

In some cases, the consolidator’s destination office or agent will prepay the destination CFS handling charges, on behalf of the consignee, and include these charges on the combined arrival notice and invoice sent to the consignee.  In other instances, the destination CFS operator will bill some or all of its charges directly to the consignee.  These separate CFS charges often include some or all of:

  * unloading charge

  * handling charge

  * load-out charge

  * forklift fee

  * administrative charge

  * facility security fee

All of these charges must be paid before the cargo will be released to the consignee.  The amounts will vary according to the size and weight of the shipment, and the rate schedules of the individual consolidator or agent, and those of the individual destination CFS.  However, the total amounts of these charges, for even a small CFS delivery shipment, are commonly in the range of $300 to $500.  Larger shipments will generally have proportionately larger “collect” charges.

Transmark Customs Brokers will normally pay out all of the above types of charges (as well as customs duty and fees, delivery charges, etc.) and include each as an additional line item on our billing invoice to the importer.  This allows TCB’s client the importer to write one check, instead of several, with confidence the charges are accurate and complete.