Read more about how third-party freight payment works, when it is used, and how it is handled in practice.
What is a 3rd-party freight payer?
A 3rd-party freight payer is a company or a person who pays the shipping costs for a shipment, without actually being the sender or the recipient.
In international freight agreements, this is often called:
- Third-party billing
- Third-party freight payer
In this case, the transport costs are invoiced to a third party that has a freight agreement with the carrier.
When do you use a third-party freight payer?
A 3rd-party freight payer is typically used in situations where a company wants control over transport costs, even though the goods are shipped between other parties.
There are many scenarios where it makes sense to use a third-party freight payer. Let us look at a couple of examples:
Example 1: When a company manages shipping from its suppliers
A company may have a favourable shipping agreement with a carrier and therefore choose to pay for the transport itself, even when the goods are sent directly from the supplier.
This could, for example, be a company in Sweden that purchases goods from a manufacturer in China. The manufacturer sends the goods, but the shipping cost is invoiced to the Danish company through its shipping agreement with the carrier.
Example 2: For centralised logistics in larger companies
Large companies often have one central shipping agreement with one or more carriers, which is used by many suppliers or departments.
This could, for example, be an international company that has a global agreement with a carrier. Suppliers send goods directly to the company’s customers, but the shipping is invoiced to the company’s main account with the carrier.
Example 3: In B2B distribution
In some B2B relationships, the parties agree that one company is responsible for the transport costs, even when they do not send or receive the goods directly.
This could, for example, be a distributor or wholesaler.
Read more about managing B2B shipping right here.
Benefits of 3rd-party freight payment
There are many other examples of when it is an advantage to use a 3rd-party freight payer.
But the typical benefits of using a third-party freight payer are:
- Better control over transport costs
- Use of existing shipping agreements and volume discounts
- Opportunity for centralised logistics management
- Easier administration for suppliers
This solution is often used in connection with international trade, dropshipping, and larger B2B supply chains.
How third-party freight payment is handled in Shipmondo
When you create a shipment in Shipmondo, you can specify the freight payer as a separate party in the shipment.
This makes it possible to let another company pay for the transport, use a different customer number with the carrier, or handle complex shipping flows involving several parties.
This is especially relevant for B2B shipments and international supply chains, where the sender, recipient, and payer are not necessarily the same company.
When the carrier supports it, the freight payer’s details can be entered directly in the shipment, so the transport costs are invoiced to the correct account.
Requirements from carriers
Carriers may have different requirements when a 3rd-party freight payer is used.
This may include information such as the customer number with the carrier, postcode and country code, and billing information.
The requirements vary from carrier to carrier.