Can You Get Sued For Marking Up Freight Charges?
One of the most common questions people ask me is about
the legalities of marking up freight on their customer
invoices. Charging an extra amount on an invoice for
freight is very common and companies rely on the extra
revenue it produces so it's not surprising that this
concern is so frequently brought up. The short answer it
is, this is perfectly legal but there are some important
things companies need to know about the way they go
about marking up this line item to their customers.
there are scores of companies who tack on an extra
amount onto the shipping portion of their invoice as an
additional profit center, to cover packaging costs or to
simply buffer themselves against unforeseen shipping
charges. I've seen companies charge a varying amount
from a few bucks all the way to multiples of what they
are actually being charged by freight providers - all of
which does not break any laws or codes of ethics.
Shipping versus Shipping & Handling
The most important part to charging an extra fee for
freight or shipping is to disclose to customers in the
purchasing terms that more than just freight is being
billed. We've all heard of the term "shipping &
handling". If a shipper is going to charge their
customer a higher amount than what they are getting
billed by their freight provider, then it is vital that
this is disclosed with language such as "shipping &
handling", "freight & processing" or some other verbiage
that let's the customer know that they are not only
getting billed for freight.
This wording needs to be backed up on the line item of
the invoice as well. So if a shipper charges $10,000.00
for their product and $200.00 for "shipping & handling",
than that needs to be broken down on the bill they are
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The Law Regarding "Shipping & Handling"
There is no legal code written on this topic however
where it can get dicey with the law is if purchasing
terms and invoices indicate that the customer will be
charged for "freight" only and they end up charging
more. By telling customers they will be billed for
"freight" or "shipping", it is implied that the selling
company is billing what they are getting charged for. If
it ever came up in front of a jury, chances are the jury
would favor the customer because the purchasing language
can be misinterpreted.
Avoid Legal Woe's with "Shipping & Handling"
If someone is reading this right now and is charging
their customers for a higher amount for freight, simply
make it clear in the purchasing terms and invoices that
you are charging something above and beyond freight.
Similarly, if a reader is currently charging for freight
only and would like to add a buffer or profit center,
making the simple change in verbiage from "freight" to
"shipping & handling" will take care of any legalities
that you may be fretting about.
Marking up freight invoices on a line item of an invoice
is common practice in the business world. Even using
this as a profit center is commonplace. However, where
companies get in trouble is by not disclosing to their
customers that they are billing them for more than just
freight. By simply being forthright to customers about
this line item clears away any misunderstandings.
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http://www.kdlog.com/ or email George Muha at