FAR 47.305-13—Transit arrangements.
Plain-English Summary
FAR 47.305-13 explains how contracting officers can use transit arrangements and transit credits to reduce Government transportation costs for freight shipments. It covers what transit arrangements are, when they may be beneficial, how solicitations must be structured, the role of traffic management personnel in identifying opportunities, when to include the Transit Arrangements provision at 52.247-56, and how to evaluate and use earned commercial transit credits under f.o.b. origin offers. It also addresses how contracts should be written when transit credits apply, including prepaid commercial bills of lading, reimbursement limits, invoice requirements, and the need to preserve the Government’s rights under the Changes clause. In practice, this section is about capturing lower freight rates that are available when goods move through an intermediate point or when a contractor already has commercial transit credits recorded with carriers. The rule is important because it can materially reduce transportation costs, but only if the solicitation, contract terms, shipment quantities, and delivery assumptions are aligned with how transit privileges actually work in the commercial freight market.
Key Rules
Transit arrangements reduce freight cost
Transit arrangements allow a carload or truckload shipment to stop at an intermediate point for storage, processing, or other purposes while still using a single through rate from origin to final destination, plus any transit-related charge. This can be cheaper than paying separate rates to and from the transit point.
Consider transit benefits early
The contracting officer must consider whether existing transit arrangements or additional transit privileges could benefit the Government. Traffic management personnel should provide information and analysis on situations where transit arrangements may save money.
Limit to f.o.b. origin offers
Solicitations using transit arrangements must be restricted to f.o.b. origin offers. F.o.b. destination offers are not suitable because they quote fixed delivered prices to the first destination and do not support the same transit pricing structure.
Use only when shipment volume supports it
The quantity awarded must be large enough to support carload or truckload shipments by the contractor, and there must be reasonable certainty that outbound shipments from the transit point will also be requested in carload or truckload quantities. Transit arrangements are not appropriate if the traffic pattern will not support those shipment sizes.
Include the transit arrangements clause
When benefits may accrue to the Government because transit arrangements may apply, the contracting officer must insert the provision at 52.247-56, Transit Arrangements, in the solicitation.
Use earned transit credits in evaluations
For large quantities of supplies that contractors normally hold in process or storage at intermediate points, contracting officers must consider contractors’ earned commercial transit credits when evaluating f.o.b. origin offers. These credits can lower the transportation cost the Government would otherwise pay.
Reimburse only documented charges
If transit credits apply, the contract must require shipment on prepaid commercial bills of lading, subject to Government reimbursement. The contractor must show transportation and transit charges separately on each invoice, and reimbursement cannot exceed the amount quoted in the offer.
Preserve Changes clause rights
The contracting officer must ensure that the transit-credit arrangement does not prevent a proper change in delivery terms under the Changes clause. Even though the shipment moves at Government risk and becomes Government property at origin, the contract still must allow lawful changes if needed.
Insert the transit credit clause when appropriate
The contracting officer must include the clause at 52.247-57, Transportation Transit Privilege Credits, when the nature of the supplies or trade custom suggests offerors may have transit credits and the Government may reduce transportation costs by using them.
Responsibilities
Contracting Officer
Evaluate whether transit arrangements or transit credits could reduce transportation costs; restrict transit-arrangement solicitations to f.o.b. origin offers; insert the required provisions and clauses at 52.247-56 and 52.247-57 when applicable; ensure shipment quantities and traffic patterns support carload or truckload transit use; and make sure contract language preserves the Government’s rights under the Changes clause.
Traffic Management Personnel
Provide information and analysis on traffic patterns and shipment situations where transit arrangements may be beneficial, including whether the volume and routing support use of transit privileges.
Contractor
When transit credits apply, ship goods on prepaid commercial bills of lading subject to Government reimbursement; show transportation and transit charges separately on each invoice; and ensure reimbursement requests do not exceed the amount quoted in the offer.
Agency / Government
Use available transit arrangements and transit credits to reduce transportation costs where appropriate, and ensure procurement planning and solicitation structure align with the freight movement method and commercial carrier tariff or rate tender terms.
Practical Implications
This section can save significant freight dollars, but only if the acquisition team identifies transit opportunities before award and structures the solicitation correctly.
A common mistake is trying to use transit arrangements with f.o.b. destination offers; the rule only works with f.o.b. origin pricing.
Another pitfall is awarding too little quantity to support carload or truckload movement, which can make the transit arrangement unusable in practice.
Contractors must invoice transportation and transit charges separately and cannot bill more than the quoted amount, so invoice review matters.
Because the shipment becomes Government property at origin under transit-credit arrangements, contracting officers should be careful to preserve delivery-change authority and avoid contract language that unintentionally limits the Government’s rights.
Official Regulatory Text
(a) Transit privileges. (1) Transit arrangements permit the stopping of a carload or truckload shipment at a specific intermediate point en route to the final destination for storage, processing, or other purposes, as specified in carrier tariffs or rate tenders. A single through rate is charged from origin to final destination plus a transit or other related charge, rather than a more expensive combination of rates to and from the transit point. (2) The contracting officer shall consider possible benefits available to the Government through the use of existing transit arrangements or through efforts to obtain additional transit privileges from the carriers. Solicitations incorporating transit arrangements shall be restricted to f.o.b. origin offers, as f.o.b. destination offers can only quote fixed overall delivered prices at first destination. (3) (i) Traffic management personnel shall furnish information and analyses of situations in which transit arrangements may be beneficial. The quantity to be awarded must be of sufficient tonnage to ensure that carload/truckload shipments can be made by the contractor, and there should be reasonable certainty that shipments out of the transit point will be requested in carload/truckload quantities. (ii) The contracting officer shall insert in solicitations the provision at 52.247-56 , Transit Arrangements, when benefits may accrue to the Government because transit arrangements may apply. (b) Transit credits. (1) In evaluations of f.o.b. origin offers for large quantities of supplies that contractors normally have in process or storage at intermediate points, contracting officers shall make use of contractors’ earned commercial transit credits, which are recorded with the carriers. A transit credit represents the transportation costs for a recorded tonnage from the initial point to an intermediate point. The remaining transportation charges from the intermediate point to the Government destination, because they are based on through rates, are frequently lower than the transportation charges that would apply for the same tonnage if the intermediate point were the initial origin point. (2) If transit credits apply, the contract shall state that the contractor shall ship the goods on prepaid commercial bills of lading, subject to reimbursement by the Government. The contracting officer shall ensure that this does not preclude a proper change in delivery terms under the Changes clause. The shipments move for the account and at the risk of the Government, as they become Government property at origin. (3) The contractor shall show the transportation and transit charges as separate amounts on the invoice for each individual shipment. The amount to be reimbursed by the Government shall not exceed the amount quoted in the offer. (4) The contracting officer shall insert in solicitations and contracts the clause at 52.247-57 , Transportation Transit Privilege Credits, when supplies are of such a nature, or when it is the custom of the trade, that offerors may have potential transit credits available and the Government may reduce transportation costs through the use of transit credits.