How to Calculate Freight Charges in Order Management

Solution and Content contributed by Bill Foster.

This is a workaround solution for one of the most asked question by Clients implementing Order Management “How to Calculate Freight Charges?” Thanks to Bill for sharing this wonderful solution. Oracle doesn’t have solution for this even in R12.

Problem:  Add Freight Charges to a Sales Order in Order Management and have Oracle/Vertex tell how much (if any) Taxes should be charged on the Freight Charges.


  • Use an Item called ‘FREIGHT’ which is basically treated as any other Item where you can establish the tax code on the line and charge tax on freight appropriately. Setup the Item in Inventory and have to pick and ship it for each order.
  • Use a “Promotional Modifier” which is qualified by many different pricing attributes (including Freight Terms, Shipping Method, Order Category, etc.).  So the idea is – “Buy any item and get Freight at ‘X’ price”.  This solution works for the credit card orders, cash / check orders and advance pay.  Net payment term orders typically use actual freight cost. You may also have to setup a new defaulting rule to handle defaulting the line type based on the item being FREIGHT.  This was to ensure the correct COGS account was used to account for the freight.
  • Profile Options to Consider:
    • OM: Charges for Included Item: When this profile option is set to ‘Y’, and the calculate price flag of the order line with an included item is either Calculate Price (Y) or Partial Price (P), then the eligible freight charges are applied to the order line. For backordered lines within Included Items, both the profile options OM: Charges for backorders and OM: Charges for Included Item need to be set to Y to view and apply any freight charges.
    • OM: Charges for backorders: If the profile option is set to ‘Y’, the system will set the calculate price flag to ‘P’ and freight charges are calculated for backorder lines. If the profile option is set to ‘N’, the system will set the calculated price flag to ‘N’ and freight charges are not calculated for backorder lines.
    • QP: Selling Price Rounding Options: Determines if your freight charges are rounded. See: Oracle Advance Pricing Implementation Guide, Profile Options.
    • OM: Interface Freight Tax Code From Line: The default value set at site level is ‘No’, so that existing customers are not impacted due to the change. Tax_code is now interfaced to AR for freight lines that are interfaced as revenue lines when the profile is set to ‘Yes’. Tax code is populated in the same way as the sales order line along with which this freight line is interfaced.
    • Tax: Inventory Item for Freight: This profile option is used only when the freight item is passed as revenue line. If you set the value of this profile option to Inventory Item then the Invoicing module passes this item for freight charges, which will be treated as revenue lines. This profile option can only be set at the Application or Site level.
    • Tax: Invoice Freight as Revenue:  If the Receivables profile option TAX: Allow Tax Code Override is set to ‘YES’, and profile option TAX: Invoice Freight as Revenue is set to ‘YES’, then freight charges are treated as revenue lines, and the Invoicing module will pass VAT tax and associated sales credits for processing.
    • OM: Credit Salesperson for Freight on Sales: This profile option specifies whether to credit the Salesperson on the invoicing line or order header for freight charges when the freight charges are treated as revenue.
    • Debugging Freight and Special ChargesClick Here
    • Metalink Notes to Consider:
      • 391160.1
      • 394055.1
      • 362820.1
      • 428243.1
      • 392938.1
      • 227719.1
      • 258981.1

Hope this helps anyone interested.  Surely this is not the only solution, but this can be achieved with no customizations and use seeded functionality only.


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