FOB Shipping: A shipping term you need to know
FOB Shipping: A shipping term you need to know.
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FOB Shipping: A shipping term you need to know.
What does FOB mean?
FOB is an acronym for “Free On Board”. FOB does not mean “Freight On Board”. FOB shipping is a shipping term and is used to determine who is paying the freight costs, shipping costs, and who is assuming risks for safe delivery. FOB shipping is the point at which the seller is no longer responsible for the cost of shipping. Additionally, FOB shipping means at what point or location the liability, costs of shipping, and ownership of the products are passed from the seller to the buyer.
In simple shipping terms, FOB shipping point is the seller’s shipping dock. FOB shipping destination is the buyer’s receiving dock. By choosing one of these FOB designations determines where the sale happens.
Typically, shipping costs are usually associated to where the buyer takes ownership. If the buyer takes ownership at the sellers dock then the buyer pays the freight. If the buyer takes ownership at the buyers receiving dock then the seller pays the freight. There are some other circumstances that this may change and are outlined below in the shipping terms section.
FOB Shipping Terms to Know and Understand
Shipping documents, sales contracts, and other legal documents will specify FOB shipping by the place of origin, place of destination, or port. Simply what this means is that in a contract the shipping terms will outline the FOB shipping point, which is a physical location that determines when the buyer has the responsibility for the freight charges and when the ownership or title of the goods are passed on from the seller. The most common physical locations used in FOB documents are originating port, place of origin, and place of destination. Below are descriptions of each FOB usage.
Freight
Freight is products or goods that have been packaged on a pallet and are ready for shipment. Freight can be transported by a car, truck, train, ship, or airplane. Freight is also referred to as cargo, loads, shipments, merchandise, or consignment.
FOB Origin
FOB Origin is the location were the goods originate. Typically the FOB origin is the sellers shipping dock.
FOB Port
FOB Port is a term used for international shipping. With international shipping, the seller is responsible for delivering the products and goods to the port. From the port, the buyer is responsible for the shipping of the goods to the delivery destination.
Consignor
Consignor means the seller of the products or goods that are going to be shipped.
Consignee
Consignee means the buyer of the products or goods that are going to be shipped.
FOB Shipping Point, Freight Collect
The FOB Shipping Point is the place of origin where the buyer assumes ownership of the goods and the risk associated with shipping. Freight Collect is the designation for responsibility for shipping charges and freight charges. Freight Collect means that the buyer is responsible for payment.
FOB Shipping Point, Freight Prepaid
The FOB Shipping Point is the place of origin where the buyer assumes ownership of the goods and the risk associated with shipping. Freight Prepaid is the designation for responsibility for shipping charges and freight charges. Freight Prepaid means that the seller is responsible for payment.
FOB Shipping Destination, Freight Collect
The FOB Shipping Destination is the place of destination where the buyer assumes ownership of the goods and the risk associated with shipping. Freight Collect is the designation for responsibility for shipping charges and freight charges. Freight Collect means that the buyer is responsible for payment.
FOB Shipping Destination, Freight Prepaid
The FOB Shipping Destination is the place of destination where the buyer assumes ownership of the goods and the risk associated with shipping. Freight Prepaid is the designation for responsibility for shipping charges and freight charges. Freight Prepaid means that the seller is responsible for payment.
Expedited Shipping
Expedited shipping is a fast and guaranteed delivery service usually in 1 to 3 days. Expedited shipping is offered by most freight brokers.
FOB Accounting
FOB Accounting is needed when buying or selling goods that involve transport. Title and ownership of goods are usually transferred from the sellers to the buyer’s balance sheet at the FOB destination point. Talk to your accountant if you have questions about FOB Accounting.
Import Fees
The import fees associated with importing goods from one country to another country. Import fees are due under FOB destination when the goods arrive at customs or the country of origin.
Wood Pallet
A wood pallet is a platform used for shipping goods. A wood pallet makes it easy to move, stack, and store goods that are about to be shipped.
ISPM 15 shipping regulation
ISPM 15 shipping regulation is an international requirement to treat wood pallet shipping containers to prevent the spread of disease or insects that could harm the environment. This is important to know for FOB shipping costs.
Shipping Documents That Use FOB Shipping Terms
Several shipping documents will contain language referring to FOB. Some examples are sales documents, international shipments, domestic shipments, export freight, import freight, and cargo documents.
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