Legal Definitions - base-point pricing

Base-point pricing is a method where the total price a buyer pays for a product includes the product's cost at its origin plus a calculated shipping charge. This shipping charge is determined by pretending the product was shipped from a specific, pre-determined "base point" location, rather than its actual manufacturing site. This base point might be a central hub, a specific factory, or even a hypothetical location. As a result, customers might pay more or less than the actual cost of shipping from the product's true origin, because the shipping cost is standardized from this fixed reference point. In some variations, it can also refer to a uniform pricing policy where the transportation cost is presumed to be the same for all locations.

• Example 1: Fixed Base Point, Varying Freight

  A large national distributor of automotive parts manufactures components in various factories across the Midwest. However, for all customer orders, they calculate shipping costs as if every part originated from their main distribution hub in Kansas City, Missouri.

  How it illustrates base-point pricing: A mechanic in Denver, Colorado, orders a specific engine part. This part was actually manufactured and shipped from a factory in Detroit, Michigan. Despite the actual origin being Detroit, the shipping charge added to the mechanic's invoice is calculated based on the distance and freight rates from Kansas City to Denver. This means the mechanic might pay a different shipping amount than if it were calculated from Detroit, which could be higher or lower depending on the relative distances from the actual origin versus the designated base point.

• Example 2: Uniform Presumed Freight

  An online company specializing in handcrafted wooden tables offers a "flat-rate delivery charge" of $150 for all orders within the continental United States, regardless of the buyer's location.

  How it illustrates base-point pricing: A customer living just 50 miles from the furniture workshop in North Carolina pays the same $150 delivery fee as a customer ordering the same table for delivery to Seattle, Washington. In this scenario, the $150 represents a uniform, presumed transportation cost that is applied equally to all buyers, effectively standardizing the shipping component of the price from an implicit base point (the workshop) for all destinations.

• Example 3: Multiple Base Points (Nearest Plant)

  A large concrete company operates numerous mixing plants across several states. When a construction company places an order for concrete, the price includes a delivery charge calculated from the concrete plant *geographically closest* to the construction site, even if the concrete is actually dispatched from a slightly further plant due to scheduling or specific mix availability.

  How it illustrates base-point pricing: A construction project in Phoenix, Arizona, orders a large volume of concrete. The company has plants in Phoenix and Tucson. The delivery charge is calculated from the Phoenix plant, as it's closer. However, on the day of delivery, the Phoenix plant is at maximum capacity, so the concrete is actually mixed and dispatched from the Tucson plant. Despite the actual origin, the customer's invoice reflects the delivery cost as if it came from the closer Phoenix base point, standardizing the cost based on the nearest designated shipping origin.