Transportation Operations LINCS Practice Exam

What does 'Cost and Freight' mean in shipping terms?

1. The product's cost is covered by the buyer

2. The cost of merchandise and the freight costs are the seller's responsibility

3. The shipping cost is not included in the product price

4. The total of operational expenses related to shipping

The correct answer is: The cost of merchandise and the freight costs are the seller's responsibility

In shipping terms, 'Cost and Freight' refers to an agreement under which the seller is responsible for the cost of the merchandise as well as the associated freight costs to transport the goods to a specified destination. This means that the seller must cover both the cost of the product itself and the charges for shipping it to the buyer's designated location. The significance of this term lies in the allocation of responsibility and financial obligations in international trade. By understanding that the seller bears the cost of freight, buyers can have greater clarity about the total expenses involved in the transaction until the goods reach the agreed-upon destination. This contrasts with other options; for instance, if the buyer were to be responsible for the costs, this would not reflect the 'Cost and Freight' arrangement. Similarly, the shipping cost being excluded from the product price or being classified as operational expenses does not accurately capture the seller's full responsibility under this term. Overall, recognizing the seller's obligation in terms of both product price and transportation costs is crucial for understanding 'Cost and Freight' in shipping agreements.