Definition:
Freight absorption, also known as absorption, refers to the practice where a manufacturer covers the expenses associated with shipping their products to a reseller, rather than requiring the reseller to bear the cost.
Manufacturers use freight absorption as a sales strategy where they cover the reseller’s shipping expenses prior to providing a quote. This approach is also referred to as absorption. For instance, an electronics manufacturer pays for the shipping of their products to a reseller who then sells them to customers. The manufacturer factors in the shipping costs before quoting a price to the reseller, demonstrating freight absorption. Similarly, a clothing manufacturer pays for the shipping of their products to a retail store, which then sells them to customers. The manufacturer considers the shipping costs before providing a quote to the retail store, which is another example of freight absorption. These instances showcase how freight absorption operates in business-to-business sales transactions. By bearing the shipping costs, the manufacturer can assist the reseller in saving money and increasing their profit margin. Additionally, this can help the manufacturer establish a stronger relationship with the reseller and boost sales.
Freight absorption refers to the practice of a company absorbing the cost of shipping or transportation charges instead of passing them on to the customer.
No, freight absorption is not mandatory. It is a business decision made by companies to either absorb the shipping costs or pass them on to the customer.
Yes, a company can change its freight absorption policy at any time. However, it is important to communicate any changes to customers and ensure compliance with any contractual obligations.
There are no specific legal requirements for disclosing freight absorption policies. However, it is generally recommended to clearly communicate the policy to customers to avoid any misunderstandings or disputes.
If a company advertises or promises to absorb freight charges, it may be held liable for not fulfilling that promise. Customers may have legal recourse if they can prove that they relied on the company’s representation and suffered damages as a result.
Yes, a company can charge different customers different freight absorption rates, as long as it does not discriminate based on protected characteristics such as race, gender, or religion. However, it is important to ensure consistency and fairness in applying different rates.
If a company has a clear freight absorption policy, customers generally cannot refuse to pay freight charges. However, if there is a dispute regarding the policy or if the company fails to fulfill its obligations, the customer may have grounds to contest the charges.
Certain industries or contracts may have specific regulations or contractual obligations regarding freight absorption. Failure to comply with these requirements may result in penalties, fines, or legal consequences.
Yes, companies can negotiate freight absorption terms with shipping carriers. These negotiations may involve factors such as volume, frequency, and the overall business relationship between the parties.
Tax deductions for absorbed freight charges may vary depending on the jurisdiction and applicable tax laws. It is advisable to consult with a tax professional or accountant to determine the eligibility for such deductions.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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