fob shipping meaning

Conversely, with FOB destination, the seller pays the shipment cost and fees until the items reach their destination, such as the buyer’s location. That destination is the receiving port, not the final stop or seller’s warehouse in the journey across the country. The buyer assumes fees like customs clearance fees and taxes at port entry. FOB destination, sometimes called FOB destination point, means that the buyer takes ownership from the shipper upon delivery of goods, usually at the buyer’s receiving dock. To be crystal clear whether a shipper is referring to UCC or Incoterms, a shipper might include the final destination name and specify Incoterms definitions, by referring to FOB Savannah in the contract. That means the delivery port is Savannah and Incoterms definitions are referenced. Incoterms 2020 considers delivery as the point when the risk of loss or damage to the goods is transferred from the seller to the buyer.

fob shipping meaning

Unlike FOB shipping point, FOB destination, indicates that the ownership of goods is not transferred to the buyer until they arrive at their destination. Ultimately, FOB helps prevent any argument or issues in the shipping process, pre-determining where responsibility lies to avoid any confusion. One of the most commonly confused terms is the ‘Free on Board’ which seems like quite an ironical name to me.

Are rules different when operating under FOB destination?

Import fees when they reach the border of one country to enter the other country under the conditions of FOB destination are due at the customs port of the destination country. On the flipside, the buyer must note in its accounting system that it has inventory on its way. That inventory is now an asset on the buyer’s books, even though the shipment has not arrived yet. Shipping via FOB Incoterms from China is simple, straightforward, and the ideal way to ensure your products leave China safely and arrive at your destination seamlessly.

fob shipping meaning

If you order a shipment of goods for your business, the use of destination or shipping point is significant. Suppose the cargo travels from Los Angeles to your business in Anchorage. “FOB Anchorage” says the seller owns the goods until they arrive. “FOB Los Angeles” says you assume ownership after the goods are loaded on the boat or plane. If they’re damaged or lost, the seller has no responsibility to reimburse you.

FOB Price: What is the Difference Between FOB and other sea shipping incoterms?

It’s best for a retailer to have a standard set of terms that can be negotiated on a per-vendor basis. Each situation differs depending on place, parties, industry, applicable laws and relevant customs and usages. General guidance cannot be expected to determine an outcome in a dispute.

  • “FOB origin” means the buyer will assume the title of the goods as soon as the carrier/hauler picks up and signs for the shipment.
  • In that case, when it comes to shipping that needs to be done internationally.
  • The buyer would then record the sale, and consider their inventory increased.
  • The policy on this company’s dock is that personnel refuse any order that has the slightest sign of damage.
  • Store Door , also known as Carrier Haulage is where the carrier bears the re…
  • However, currently, it can be used for just about any mode of transit shipments.

FOB shipping point transfers the goods to the buyer at the point the goods are loaded into the truck or the shipping point. Also, shipping point usually implies that the fob shipping point buyer pays for the freight charges to ship the goods. This means that as soon as the seller loads the goods onto the freight truck, they are legally owned by the buyer.


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