Freight: Overview, definition and example
What is freight?
Freight refers to goods or cargo transported from one location to another, typically as part of a commercial transaction. The term also encompasses the cost associated with transporting these goods via various modes, including road, rail, air, or sea. Freight services are a crucial component of supply chain management and international trade, ensuring goods reach their intended destination efficiently and securely.
For example, a manufacturer shipping products to a retailer might hire a logistics company to handle the freight by trucking the goods to the retailer’s warehouse.
Why is freight important?
Freight is important because it facilitates the movement of goods across local, national, and international markets, enabling businesses to operate efficiently and meet customer demand. It supports global commerce by connecting manufacturers, suppliers, and consumers.
For businesses, managing freight costs effectively is critical to maintaining profitability, especially in industries with significant logistics requirements. Freight services also ensure timely delivery, which is essential for maintaining customer satisfaction and operational continuity. Additionally, freight terms in contracts, such as FOB (Free on Board) or CIF (Cost, Insurance, and Freight), define who bears the cost and responsibility for goods during transit.
Understanding freight through an example
Imagine a furniture manufacturer in Canada ships dining sets to a retailer in the United States. The shipping company hired to transport the goods charges a freight cost based on the weight, volume, and distance of the shipment. Depending on the terms of the sales contract, the manufacturer or retailer may be responsible for paying this freight cost.
In another example, an e-commerce company imports electronics from a supplier in Asia. The contract specifies CIF terms, meaning the supplier is responsible for arranging the freight, insurance, and delivery of the goods to the buyer’s port, with the cost included in the total invoice.
An example of a freight clause
Here’s how a freight clause might appear in a shipping agreement:
“The Seller shall arrange for the shipment of goods via a reputable freight carrier, with delivery to the Buyer’s designated location. All freight costs shall be borne by the [Seller/Buyer] unless otherwise agreed upon in writing. The freight carrier shall provide tracking and proof of delivery upon request.”
Conclusion
Freight plays a vital role in the global economy by enabling the transportation of goods across regions and markets. For businesses, managing freight effectively ensures cost efficiency, timely deliveries, and smooth supply chain operations. Including clear freight terms in contracts is essential for allocating costs and responsibilities, reducing disputes, and ensuring seamless logistics management.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.