Once the goods are loaded onto the carrier at the FOB shipping point, you assume ownership and responsibility for any damages or losses during transit. If anything happens to the goods during shipping, you must file a claim with the carrier to recoup your losses. FOB stands for « Free On Board » and refers to the location where ownership and responsibility for goods transfer from the seller to the buyer. Specifically, FOB shipping point means that the buyer assumes ownership and responsibility as soon as the goods leave the seller’s designated shipping point.
For example, if the contract specifies FOB Shipping Point and the goods are damaged during transport, the buyer may be responsible for filing a claim with the carrier. On the other hand, if the contract specifies FOB Destination, the seller may be responsible for filing the claim. It’s important to consult with legal counsel to ensure the appropriate FOB term is chosen for each transaction. Additionally, understanding the difference between FOB Shipping Point and FOB Destination can help to avoid any misunderstandings or disputes between the buyer and seller.
Consider shipping costs
Understanding the differences between each is as simple as knowing how much responsibility the buyer and supplier assume under each agreement. Just enter the dimensions and weight of your goods and specify the port of shipment, and you’ll get your FOB price calculation instantly. The term ‘free’ refers to the supplier’s obligation to deliver goods to a specific location, later to be transferred to a carrier. With the advent of e-commerce, most commercial electronic transactions occur under the terms of « FOB shipping point » or « FCA shipping point ». Since there is more than one set of rules, and legal definitions of FOB may differ from one country to another, the parties to a contract must indicate which governing laws are being used for a shipment.
The advantages of using fob shipping point include that it is typically less expensive for the seller since they are only responsible for transporting goods to the shipping point. However, the disadvantage is that the seller is still responsible for transport risks until the goods are loaded onto the carrier. This means that if anything happens to the goods during transport, the seller is responsible for them and may incur additional costs. Another factor to consider when deciding which FOB term to use is the cost of transportation.
Understanding the Difference Between FOB Destination and FOB Shipping Point
DAP, or “delivered-at-place,” says a seller agrees to be responsible for transporting goods to a location stated in the sales contract. When shipping goods to a customer, FOB shipping point or FOB destination may be two primary options to choose from. FOB shipping point holds the seller liable for the goods until the goods begin their transport to the customer, while FOB destination holds the seller liable for the goods until they have reached the customer. For example, assume Company XYZ in the United States buys computers from a supplier in China and signs a FOB destination agreement. Assume the computers were never delivered to Company XYZ’s destination, for whatever reason.
