FAR 47.303-17—Contractor-prepaid commercial bills of lading, small package shipments.
Plain-English Summary
FAR 47.303-17 addresses when and how a contractor may use contractor-prepaid commercial bills of lading for small-package shipments of supplies acquired f.o.b. origin. It covers the contracting officer’s authority to approve these shipments, the size and security limits on eligible shipments, and the ability to consolidate Government shipments with the contractor’s own prepaid freight to obtain lower rates. It also explains who bears risk of loss, when title passes to the Government, how transportation charges are reimbursed, what documentation is normally required, and limited exceptions for small or unsupported charges. The section further prohibits splitting shipments or invoices to avoid documentation rules and requires use of the F.o.b. Origin, Prepaid Freight-Small Package Shipments clause when applicable. In practice, this provision is meant to reduce transportation costs and administrative burden while preserving accountability for freight charges and shipment support.
Key Rules
CO authorization required
The contracting officer may authorize contractor-prepaid commercial bills of lading only when it is advantageous to the Government. The authority applies to domestic destinations, including DoD air and water terminals, and only for eligible f.o.b. origin shipments.
Small, unclassified shipments only
Eligible shipments may not exceed 150 pounds by commercial air or 1,000 pounds by other commercial carriers. The shipments also must not have a security classification.
Consolidation may be allowed
The contracting officer may permit Government shipments to be consolidated with the contractor’s own prepaid shipments if the Government’s f.o.b. origin shipments have been initially consolidated appropriately. The goal is to capture lower carload or truckload rates, with the Government paying only its pro rata share.
Cost savings must be evaluated
Agency transportation personnel must review overall transportation costs before authorizing movement. The decision must show that the arrangement saves money for the Government while still meeting contract and traffic management requirements.
No contract modification needed
Shipments under authorized prepaid commercial bills of lading do not require a contract modification. Unless the contract says otherwise, the shipment is at the Government’s risk, and title passes to the Government when the goods are loaded on the carrier and the contractor receives the carrier’s receipt.
Reimbursement and claims process
The contractor pays the freight charges up front and is reimbursed by the Government. Any loss or damage claims are handled under agency regulations, so the contractor should follow the applicable claims process and documentation rules.
Invoice support rules
The contractor’s invoice must list prepaid transportation charges as a separate item for each shipment and normally must include a receipted freight bill or other proof of receipt. Limited exceptions apply for charges of $100 or less, and for unsupported charges of $250 or less when the contractor cannot reasonably provide a receipted freight bill and the agency finds the charge reasonable.
No splitting to evade support
Shipments and invoices may not be split to keep charges at or below the documentation thresholds. The rule is intended to prevent avoidance of the required support for transportation charges.
Required contract clause
The contracting officer must insert the clause at 52.247-65, F.o.b. Origin, Prepaid Freight-Small Package Shipments, in solicitations and contracts when f.o.b. origin shipments will be made.
Responsibilities
Contracting Officer
Determine whether contractor-prepaid commercial bill of lading shipments are advantageous to the Government and authorize them only when appropriate. Ensure the required clause at 52.247-65 is included in solicitations and contracts when f.o.b. origin shipments are expected, and decide whether consolidation arrangements are permitted under the contract.
Agency Transportation Personnel
Evaluate overall transportation costs before approving movement under this authority. Confirm that the arrangement produces savings consistent with contract requirements and traffic management considerations, and apply agency rules for loss or damage claims and documentation exceptions.
Contractor
Use commercial bills of lading only for authorized shipments that meet the weight and security limits. Prepay freight charges, consolidate shipments only when authorized, invoice transportation charges as separate line items, provide required freight-bill support or acceptable substitute evidence, and avoid splitting shipments or invoices to evade documentation requirements.
Government Consignee
Receive the shipment and, when consolidation is used, receive a copy of the commercial bill of lading promptly. Use the shipment and related documentation in accordance with agency receiving and claims procedures.
Agency Claims/Property Personnel
Process loss or damage claims under applicable agency regulations and coordinate with transportation and contracting personnel as needed when shipment risk, title passage, or claim issues arise.
Practical Implications
This section is mainly about low-value logistics efficiency: it lets contractors front freight charges for eligible small shipments and get reimbursed, which can speed movement and reduce administrative handling.
The biggest compliance risk is documentation failure. Contractors must keep freight support with each shipment unless a narrow exception applies, and agencies should not accept unsupported charges outside the stated thresholds.
Do not assume every small shipment qualifies. The shipment must be f.o.b. origin, domestic, unclassified, within the weight limits, and specifically authorized by the contracting officer.
Consolidation can save money, but only if it is planned and approved correctly. Agencies should verify that combining Government and contractor freight actually lowers total cost and does not create traffic-management or accountability problems.
Splitting shipments or invoices to fit under the $100 threshold is prohibited and can create audit findings, payment delays, or questioned costs.
Official Regulatory Text
(a) If it is advantageous to the Government, the contracting officer may authorize the contractor to ship supplies, which have been acquired f.o.b. origin, to domestic destinations, including DoD air and water terminals by common carriers on commercial bills of lading. Such shipments shall not exceed 150 pounds by commercial air or 1,000 pounds by other commercial carriers and shall not have a security classification. (b) The contracting officer may authorize the shipments under paragraph (a) of this subsection to be consolidated with the contractor’s own prepaid shipments for delivery to one or more destinations, if all appropriate f.o.b. origin shipments under one or more Government contracts have been consolidated initially. The contractor may be authorized to consolidate less-than-carload or less-than-truckload Government shipments with its own shipments so that the Government can take advantage of lower carload or truckload freight costs. The Government shall assume its pro rata share of the combined shipment cost. Agency transportation personnel shall evaluate overall transportation costs before authorizing any movement to ensure savings to the Government consistent with other contract and traffic management considerations. When consolidation is authorized, a copy of the commercial bill of lading shall be mailed promptly to each consignee. (c) Shipments under prepaid commercial bills of lading, as authorized in paragraph (a) of this subsection, do not require a contract modification. Unless otherwise provided in the contract, the supplies move for the account of, and at the risk of, the Government. The supplies become Government property when loaded on the carrier’s equipment and the contractor has obtained the carrier’s receipt. The contractor pays the transportation charges and is reimbursed by the Government. Loss or damage claims shall be processed in accordance with agency regulations. (d) The contractor’s invoice for reimbursement by the Government shall show the prepaid transportation charges as agreed (see paragraph (b) of this subsection), as a separate item for each individual shipment. The contractor shall support the transportation charges with a copy of the carrier’s receipted freight bill or other evidence of receipt, except as follows: (1) A Government agency may determine that receipted freight bills or other evidence of receipt are not required for transportation charges of $100 or less. (2) A Government agency may pay an invoiced but unsupported transportation charge of $250 or less per transaction ( i.e., purchase, invoice, or aggregate billing or payment for multiple purchases), if- (i) The contractor cannot reasonably provide a receipted freight bill; and (ii) The agency has determined that the charges are reasonable. Determination of reasonableness may be based on- (A) Past experience (authenticated transportation charges for similar shipments); (B) Rate checks; (C) Copies of previous freight bills submitted by the contractor; or (D) Other information submitted by the contractor to substantiate the amount claimed. (3) Receipted freight bills in support of invoiced transportation charges of $100 or less are not required for reimbursement by the Government, if- (i) The underlying contract specifies retention by the contractor of all records for at least 3 years after final payment under the contract; and (ii) The contractor agrees to furnish evidence of payment when requested by the Government. (e) Shipments and invoices shall not be split to reduce transportation charges to $100 or less per transaction as a means of avoiding the required documented support for the charges. See paragraph (d)(2) of this subsection for unsupported transportation charges of $250 or less. (f) The contracting officer shall insert the clause at 52.247-65 , F.o.b. Origin, Prepaid Freight-Small Package Shipments, in solicitations and contracts when f.o.b. origin shipments are to be made.