What Does FOB Mean? How Can FOB Terms Affect Your Company?

fob shipping

Also, the best thing about the shipping feature with Strikingly is that you have the option to grant free shipping for every order of at least a certain amount before taxes. The buyer must instruct the seller on the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. Free on Board is a term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments. In a nutshell, in FOB Shipping Point , the seller is responsible for loading the goods onto the vessel.

  • Instead of ownership transferring at the shipping point, the manufacturer retains ownership of the equipment until it is delivered to the buyer.
  • The seller has no legal reason to accept those goods back and the return shipment could possibly result in additional damages.
  • For example, assume Company XYZ in the United States buys computers from a supplier in China and signs a FOB destination agreement.
  • However, under Incoterms 2020, the loading is fulfilled only when the goods are on board the ship and the cables are no longer holding the container.
  • «FOB Destination» means the seller retains the risk of loss until the goods reach the buyer.

An advantage for the buyer of FOB would be that they can organize the best way to deliver the shipment. This means that they can get a good deal on freight services and not have to rely on the seller’s chosen delivery method. FOB is good for a seller as once the product leaves the warehouse the https://www.bookstime.com/ shipment is the responsibility of the buyer. If the shipment is damaged or lost the buyer will need to claim back on it, while the seller considers the deal done once it leaves their premises. FOB changes the rules for who is responsible for a shipment, shifting it from the seller to the buyer.

FOB Add-on Terms

When opting for FOB Origin, the buyer is liable for goods damaged or destroyed at the point of origin. When agreeing upon FOB Origin the only responsibility of the seller is to properly package the goods for transport. The buyer is hereby responsible and liable for the cargo from the collection point. Depending on the FOB agreement stated on the purchase order, the above costs can be split or fully paid by one of the parties. Expert freight shipping tips and fast, easy tools to help you ship freight. Sold” after they’ve transferred title and responsibility to the buyer, this is an important distinction.

Who pays duties and taxes on FOB?

06 Who Assumes the Cost of FOB Shipping Point vs Destination? Traditionally with FOB shipping point, the seller pays the transportation cost and fees until the cargo is delivered to the port of origin. Once on the ship, the buyer is responsible financially for transportation costs, customs clearance, fees, and taxes.

FOB Destination, Freight Prepaid – The seller delivers and pays all shipping costs until cargo arrives at the buyer’s destination port. FOB historically had referred to the transfer of title and liability between buyers and sellers of goods, and it was used solely for goods transported by ship.

What is FOB Shipping? Understanding FOB Shipping Point vs. Destination

Conversely, when you are selling to an overseas buyer, it is in your best interest for the buyer to become responsible as soon as it leaves your charging dock. FAS. Free Alongside, which means that the seller must deliver goods on a ship that pulls up next to a boat of a specific name, close enough that the ship can use its lifting devices to bring it onboard.

  • Free on board, also referred to as freight on board, only refers to shipments made via waterways, and does not apply to any goods transported by vehicle or by air.
  • The amount of inventory and cost of goods on the books changes as well, depending on where the goods are and the FOB status.
  • The FOB incoterm is only applied to shipments being sent by sea or waterway.
  • The transfer of title may occur at a different time than the FOB shipping term.
  • If opting for FOB Destination, the seller is responsible for the safety of the goods at the point of origin.
  • In this article, ShipCalm will explore what FOB is, the pros and cons of FOB, and how a third-party logistics company like ShipCalm can help your business with all its shipment needs.
  • The documents required differ from country to country, so due diligence and research are needed to prevent complications.

Sure, you want to keep costs low by making your own shipping arrangements, but can you afford the liability if something goes wrong? Know your FOB options, so you can make the best decision based on each situation. Let’s say you’re in Dallas and purchase a bulk order of widgets from a San Francisco wholesaler. An «FOB San Francisco» shipment means you’re responsible for shipping them from San Francisco to Dallas and own the goods when the shipping company picks them up. Unlike fob shipping point point, FOB destination, indicates that the ownership of goods is not transferred to the buyer until they arrive at their destination. Would you like to organise freight shipping and have the full support of a logistics expert? The legal issues raised in FOB designations are nothing new to us here at Freightquote.


Origin) means that the buyer will receive the title for the goods they purchased once they’ve reached the shipping dock. After the title is transferred, the seller’s responsibility ends, and it falls to the buyer to ensure their goods reach their final destination promptly and in sound condition. A straightforward definition of FOB shipping point is that it releases the seller from any obligation to the package once it gets shipped. It simply means that for a seller who has an overseas buyer, it is in its best interest to have the buyer be responsible for any loss or damage of the package when it gets shipped. Conversely, a buyer who is shopping from an online store with an address located out of the country would want to have an FOB destination rather than FOB shipping point. The question about who will be held accountable for the shipment, between the buyer and the seller, is certainly an important matter to discuss.

fob shipping

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