The Impact of “Freight Prepaid / Freight Collect” Records on Freight Accounts Receivable Tracking

(Debtor identification, burden of proof, and practical collection strategies based on bill of lading annotations)

In maritime freight transactions, the collection of freight receivables often hinges on the question of "who owes the money." In practice, the first place to look is the "Freight Prepaid" or "Freight Collect / Freight Payable at Destination" entries on the bill of lading (B/L). However, these entries not only provide information on "who will make the payment" in commercial practice; they also affect the presumptions and limits regarding the consignee's liability for freight and related items in Turkish maritime commercial law . Especially in enforcement proceedings (non-judgmental proceedings/cancellation of objections) or debt collection cases, targeting the wrong debtor often results in wasted time and expense.

Below, I will discuss step-by-step what the terms "freight prepaid/collect" mean in the Turkish Commercial Code (TTK) system, the correct debtor selection in debt collection , evidence strategy , and critical errors in practice

1) What do “Freight Prepaid” and “Freight Collect” mean?

• Freight Prepaid : This is a record indicating that the freight has been or will be paid by the shipper/consignor at the port of loading (or during shipment) . In commercial terminology, it means "freight in advance."

• Freight Collect / Freight Payable at Destination : Indicates that the freight will be paid by the consignee upon arrival (at the port of discharge/delivery) ; in practice, it establishes a "goods delivery-payment" link

These records alone do not resolve everything; because the debtor of the freight receivable and the conditions under which the consignee incurs the debt are systematically regulated in the Turkish Commercial Code.

2) Basic framework in Turkish law: Freight debtor, the status of the consignee, and the evidentiary function of the bill of lading

a) Principal debtor rule: Carrier

Article 1200 of the Turkish Commercial Code is very clear: "The debtor of the freight is the carrier." This means that the counter-performance (fee) of the freight contract is, as a rule, to be paid by the shipper/charterer

b) When does the sender become liable for the debt? (Turkish Commercial Code, Article 1203)

If the goods are to be delivered to a person other than the consignor, the consignee becomes liable for all receivables for which they are authorized to pay according to the terms of the freight contract/bill of lading upon requesting delivery of the goods . The critical point here is that the consignee's debt is not automatic; it arises with the request for delivery and is limited by the terms of the bill of lading/invoice .

c) Limits of the right of retention (Turkish Commercial Code, Articles 1204 and 1201)

• The consignee is subject to a lien only claims falling under Article 1203 of the Turkish Commercial Code ; this lien cannot be exercised against the consignee for other claims.

• The carrier's right of lien on the goods for receivables arising from the freight contract is regulated in Article 1201 of the Turkish Commercial Code; it has a security mechanism that can be used even after delivery under certain conditions.

d) What happens if there is no freight record in the bill of lading? (Presumption under Article 1240 of the Turkish Commercial Code)

Article 1240/1 of the Turkish Commercial Code establishes a presumption that the consignee is not liable for freight/demurrage if the bill of lading does not contain a clause stating that "the freight shall be paid by the consignee" ; moreover, the contrary of this presumption cannot be proven against the third party (including the consignee) who receives the bill of lading.

This provision gives rise to the harshest consequence of the “freight prepaid/collect” argument in debt collection: if the payment obligation is not explicitly assigned to the consignee on the bill of lading, collection against the consignee is locked in most scenarios.

3) The first decision in debt collection: Who will you go to?

In freight debt collection (and often related items), the first step in enforcement/litigation strategy the correct debtor . Otherwise, the process will be prolonged by debtor objections or objections of standing.

Scenario 1 — If the bill of lading contains entries such as “Freight Collect / Payable on Delivery”

In this case, the consignee the moment delivery is requested (Turkish Commercial Code, Article 1203).
It is clearly emphasized in legal doctrine and practice that phrases such as "freight collect, payable at destination, payable on delivery" in the bill of lading are used to establish the consignee's liability.

Advantage of follow-up: When the debtor is selected as the sender, if you have documents showing the Bill of Lading (B/L) and delivery request, summary enforcement yields faster results.
Risk: Objections increase if it is unclear who requested the delivery or if the definition of "merchant" (consignee/notify/forwarder) is not specified.

Scenario 2 — If the bill of lading states "Freight Prepaid"

The entry "freight prepaid" conveys the message to the outside world that "freight has been paid/is due." This entry weakens the argument that "freight liability arises upon delivery request" in most cases from the consignee's perspective, because the Bill of Lading (B/L) does not state that the freight will be collected from the consignee. There are examples in legal doctrine where the prepaid/collect distinction is interpreted in this way.

Impact on debt collection (practical):

• If you initiate legal proceedings against the sender, they will attempt to strengthen their defense of "B/L prepaid; I cannot be held liable" by citing the presumption under Article 1240 of the Turkish Commercial Code.

• Especially if the bill of lading has been transferred (letter of credit chain, endorsement, etc.), claims such as "it wasn't actually prepaid" against a bona fide holder often backfire.

In this scenario, the primary address for collection is usually the carrier/shipper (Turkish Commercial Code, Article 1200).

Scenario 3 — If the bill of lading is “silent” (no prepaid/collect) or vague

Article 1240 of the Turkish Commercial Code provides a presumption: "the consignee is not obligated to pay the freight."
In this case, pursuing debt collection against the consignee is risky from the outset in most cases. It is safer to first pursue a contractual relationship with the shipper.

4) Writing "Freight Prepaid" and not collecting the payment: The most expensive mistake for the carrier

The most common crisis in practice is this: The agent/carrier, under commercial pressure, writes "freight prepaid" on the Bill of Lading; however, the freight has not actually been collected. Then, upon arrival, the consignee says "I saw it as prepaid" and wants to take the goods without paying (or has already taken the goods).

At this point, debt collection is divided into two categories:

1. Legal action/lawsuit against the carrier (as a rule, the correct address): Since the carrier is the debtor for the freight, proof is established through the contract, invoice, reservation/booking note, and email communication.

2. Pursuing legal action against the sender (often more difficult):

   • If the bill of lading does not explicitly impose an obligation to pay freight on the consignee, the presumption under Article 1240 of the Turkish Commercial Code becomes a strong barrier protecting the consignee.

   • The mere request for delivery by the consignee may not be sufficient; because Article 1203 of the Turkish Commercial Code sets limits on "receivables for which payment is authorized"; and the prepaid clause also narrows the "authorization" argument.

Conclusion: If marked as prepaid, "directing to the sender" in accounts receivable often reduces collection efficiency; the receivable gets stuck on the shipper's side.

5) “Freight Collect” entry: Delivery request + proof = quick collection

In "freight collect" files, the carrier has the upper hand because the payer/paying party is externally disclosed. The strategy for this type of file is:

a) Document the delivery request

Since a "delivery request" is critical for the recipient to become indebted under Article 1203 of the Turkish Commercial Code, the following documents are invaluable:

• Delivery Order / Ordino request

• Customs declaration/receipt document showing the recipient's status in customs procedures

• Terminal “gate-out / release” logs

• In whose favor was the “Telex release / express release” approval granted?

• Container delivery/receipt, EIR (Equipment Interchange Receipt)

When enforcement proceedings are initiated without a court judgment, these documents provide the evidentiary basis for any objections raised, potentially leading to a counterclaim in a lawsuit challenging the objection.

b) Don't miss the right to detention/safeguard window

If the goods are still in the carrier's possession, the right of lien (Turkish Commercial Code, Article 1201) creates collection pressure.
However, the limit of the right of lien against the consignee is Article 1204 of the Turkish Commercial Code: only for receivables under Article 1203.
Therefore, in "collect" files, the threat of the right of lien on the correct items (otherwise the risk of bad faith/negative determination increases).

6) Collection strategy: Is it an enforcement proceeding without a court order, or a debt collection lawsuit?

Execution without a court order (usually the first option)

• Advantage: Fast; if the debtor does not object, it proceeds directly to the seizure stage.

• Critical: Choosing the right debtor and having evidence ready in case an objection is raised, in order to challenge the objection in court

In a collect case (if the delivery request and bill of lading record are clear), enforcement without a court order is often effective.
In a prepaid case (if the bill of lading is prepaid but there is no collection), enforcement directly against the sender often leads to "objections + lengthy legal proceedings"; it is more rational to pursue the shipper.

Debt collection lawsuits (especially in complex contractual relationships)

The case might be clearer directly in these situations:

• If there is a discrepancy between the Bill of Lading (B/L) and the charterparty/booking note

• If the debtor's identity is open to technical discussion, such as "Is it a forwarder, an NVOCC, or a merchant?"

• If the items are separated apart from freight, such as "THC/demurrage/detention/extra handling"

In Istanbul Regional Court of Appeals decisions, examples can be given of cases where the freight entry in the bill of lading and the provisions regarding arrival costs are the subject of a joint dispute; in such cases, item-by-item proof must be well-structured.

7) Evidence strategy: "Recording" alone is not enough; package the file

The most common mistake in freight receivables collection is relying on a "single document" (bill of lading only or invoice only). A strong file package includes:

1. Documents establishing the transportation relationship

• Booking note / transportation instructions

• Freight contract / charterparty (if any)

• Bill of lading (all sides; including back clauses)

2. The chain showing with whom the debtor-creditor relationship is established

• Party emails, freight confirmation, rate confirmation

• Agent/forwarder authorization letters, invoice addressee logic

• If the definition of "merchant" (consignee/shipper/notify/holder) is effective, then this serves as the basis

3. Documents showing the delivery request and delivery (essential in the collect file)

• Order/DO, terminal release, EIR, customs clearance documents

4. Account statement

• Freight invoice, detailed statement of account

• Exchange rate/currency and maturity terms

• Offset table if there is a partial payment

This package shortens the debate over "who owes" in appeals against annulment of objections; it also places ancillary claims, such as compensation for wrongful objection, on a more secure footing.

8) Practice checklist: 7 moves before a dispute arises

1. If you're writing "prepaid" on the bill of lading, don't do it before you've received payment. (This is the biggest structural risk.)

2. For Collect, link the payment upon delivery mechanism (release condition) to the procedure.

3. Do not leave the B/L "silent"; Article 1240 of the Turkish Commercial Code presumes that it will create space for the recipient.

4. Clarify expenses other than freight (THC, demurrage, detention) in the Bill of Lading or referenced terms; separating the items makes proof easier.

5. Systematically store proof of delivery requests (DO/release/gate-out).

6. If the debtor is a forwarder, clarify the distinction between "principal carrier/consignor" contractually (who is acting on whose behalf?).

7. If you are going to pursue enforcement proceedings, prepare the case file (evidence package) to court standards from the outset, anticipating possible objections.

Conclusion

The phrases "freight prepaid/collect" are not merely commercial notes; they are a legal leverage that determines the objective of debt collection , the burden of proof , and often the speed of collection . While the carrier is generally the debtor of the freight under Turkish law , the consignee's liability is shaped by the delivery request and the payment regime of the bill of lading (Turkish Commercial Code, Articles 1203-1204). If the bill of lading does not contain a clause stating that the consignee will pay, the presumption under Article 1240 of the Turkish Commercial Code significantly weakens the possibility of pursuing legal action against the consignee.

Therefore, in every freight dispute, the first question should not be "How much am I owed?" but rather "To whom and under what conditions did the bill of lading assign this receivable?"