Legal Definitions - freight absorption

Definition: Freight absorption is a sales method used by manufacturers where they pay for the reseller's freight costs before quoting a price. This is also known as absorption.

Examples:

• A manufacturer of electronics pays for the shipping costs of their products to a reseller, who then sells the products to customers. The manufacturer accounts for the shipping costs before quoting a price to the reseller. This is an example of freight absorption.
• A clothing manufacturer pays for the shipping costs of their products to a retail store, who then sells the products to customers. The manufacturer accounts for the shipping costs before quoting a price to the retail store. This is also an example of freight absorption.

These examples illustrate how freight absorption works in a business-to-business sales transaction. The manufacturer takes on the cost of shipping the products to the reseller, which can help the reseller save money and increase their profit margin. This can also help the manufacturer build a stronger relationship with the reseller and increase sales.