Freight in Shipping: Meaning and Types

In shipping, freight is the payment a charterer or shipper makes to the ship operator for carrying the cargo. The word is also used for the cargo itself.

What freight means

Freight is the price of the carriage. In a voyage charter it is agreed for the cargo of the voyage, often per metric tonne or as a lump sum. In a time charter the payment is called hire and is paid per day. The word "freight" is also used for the goods that are carried, as in "freight forwarder".

When freight is paid

Prepaid freight is paid before or at loading, and the bill of lading says so. Freight collect, or payable at destination, is paid by the receiver when the cargo is discharged. The charter party says when the freight is earned and when it is due.

Dead freight

If the charterer ships less cargo than the agreed quantity, the ship operator can claim dead freight: the freight for the space that was booked and not used. A cargo quantity written with a tolerance, such as ten percent more or less, protects the charterer against small differences.

Freight and the market

Freight rates follow the supply of ships and the demand for cargo and change with the route, the ship size and the season. See freight rates explained for the units and the main drivers.

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