It is important to note that the shipping point is different from the destination point, which is the location where the goods are delivered to the buyer. In some cases, the shipping point and destination point may be the same, but in others, they may be located in different cities or even different countries. FOB is a widely used shipping term that applies to both domestic and international transactions. It’s an agreement between the buyer and seller that specifies when the ownership and liability for the goods being shipped transfer from the seller to the buyer. FOB terms are typically included in shipping orders and contracts, detailing the time and place of delivery, payment terms, and which party handles freight costs and insurance.

FOB Destination Example

Beyond those costs, FOB terms also affect how and when a business will account for goods in its inventory. In the next installment of PARCEL Counsel, we will look at the factors to be considered in choosing, modifying and negotiating the basic UCC F.O.B. term of sale. Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by what is f.o.b. shipping point helpful graphics and animation videos. This can be particularly beneficial when handling specialized goods, navigating congested shipping lanes, or managing a tight supply chain that requires precise timing. The selection of an appropriate Incoterm, including FOB, depends on the specifics of the trade deal. But it’s good practice for either the buyer or seller to obtain China freight insurance.

Cost Savings for Buyers/Sellers

Once the delivery is unloaded in the receiving country, responsibility is transferred to you. With FOB destination, ownership of goods is transferred to the buyer at the buyer’s loading dock. From there, the title for the goods transfers from the supplier to the buyer immediately and if anything happens to the goods at any leg of the journey to the buyer from there, the buyer assumes all responsibility. Real-time driver tracking, customer notifications, proof of delivery, and seamless integration with existing systems make Upper a comprehensive solution. So, try Upper’s 7 days free trial and experience a faster, more reliable, and cost-effective movement of goods across your logistics operations.

Understanding the Impact of Incoterms on Freight Delivery

The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Understanding the nuances of FOB is paramount for businesses engaged in international trade, as it directly influences pricing, risk management, and logistical strategies. FOB, while advantageous in many ways, comes with inherent transit risks, especially for the party responsible during the shipping. Other terms, like CIF (Cost, Insurance, and Freight) or EXW (Ex Works), offer different arrangements regarding costs, responsibilities, and risk points. Throughout the transportation process, the seller remains the legal owner of the goods.

Understanding Incoterms in International Shipping

Due to agreed FOB shipping point terms, they’ll have no recourse to ask the seller for reimbursement. When goods are labeled as FOB shipping point, the seller’s role in the transaction is complete when the purchased items are given to a shipping carrier and the shipment begins. FOB, or “free on board,” is a widely recognized shipping rule created by the International Chamber of Commerce (ICC). It defines the point when a buyer or seller becomes liable for goods transported by sea.

• With FOB shipping point, ownership of goods is transferred to the buyer once they leave the supplier’s shipping point.
• Simply put, an incoterm is the standard contract used to define responsibility and liability for the shipment of goods.
• Any missing information will be confirmed, and the logistics company will reserve a spot on the designated ship for your cargo.
• Instead, the buyer assumes all responsibility for the shipment when it leaves the seller’s dock.
• Additionally, FOB Shipping Point can be more flexible, as buyers can choose their carriers and shipping methods.
• FOB, like all the multimodal rules, is suitable for both domestic and international transactions.

This means the seller retains ownership and responsibility for the goods during the shipping process until they’re delivered to the buyer’s specified location. Understanding Free on Board (FOB) is crucial for businesses engaged in domestic and international trade. FOB Origin and FOB Destination each come with their own set of responsibilities, costs, and risks for buyers and sellers.

How to Choose Between FOB Shipping Point and FOB Destination

If you are sending a full container load (FCL), enter the information under the Containers tab. There are situations where you may be responsible for covering costs before your goods are on board. An alternative could be other Incoterms like CIF, EXW, or DAP, depending on the desired distribution of responsibilities.

Freightos.com helps you spend less time and money on each shipment, reducing spend with better: