Precisely what is “freight allowance” and how does it apply to freight shipping? It’s a question that arises fairly infrequently, but it is a good one to know. Read below to understand what, exactly, freight allowances are.
Freight allowances provide a discount on freight charged to customers (typically) based on how much they purchase. Freight allowances can be a set dollar amount or a percentage. Freight allowances are most often used as buying incentives. In some cases, shippers will offer allowances on freight in much the same way retailers do with price matching. If, say, a competitor is closer to the buyer and can ship a similar product cheaper, the original shipper might offer an allowance to ship at the same rate as the competitor.
For example, you can create a freight allowance with a “Type” of “Dollars” that has two brackets:
Assuming the above table:
- If the customer orders $75, they will pay the full freight charge.
- If the customer orders $200, they will get a 25% discount off of their freight charge.
- If the customer orders $750, they will get a 50% discount off of their freight charge.
- If the customer orders $1,000 or more, they will not be charged for freight at all.
Other Key Shipping Terms include:
Destination Prepaid (Code: DSTNTN-PPD or DE-PPD)
The supplier ships the goods, at which point the buyer takes delivery; once the goods are received, the supplier covers the shipping costs/freight charges.
The receiver of the shipment pays the freight charges.
Origin (Code: ORG)
This indicates the shipment or freight’s starting point.
Prepaid and Add (PPA)
The shipper selects the carrier and pays the freight charges upfront, then adds the charges – in full or partial – to the customer’s invoice.
Prepaid Partial Truckload (PP-PRTL)
A customer pays shipping charges in advance for a load that, at under 10,000 pounds, is less than full truckload (TL) yet larger than what qualifies for less than truckload (LTL).
Third-Party Billing (TPB)
A third party, rather than the shipper or receiver, pays the freight charges.
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