In maritime shipping, the term FOB is used to describe who is liable for damage to goods when it is in sea transit. In all apparency, the buyer is responsible for damage, and for some reasons. We’ve come up with this article to show you how FOB works in shipping as it has a lot more than what may be seen in this post.
Bear in mind, that there is usually a transfer of ownership from the seller to the buyer when goods cross the ship’s rail. These transferred goods are transferred as ‘FOB’.
Let us say the ship sank, Because the buyer had already assumed control of the ship, if it sank, the buyer would be liable for a FOB shipment. This means the buyer takes the whole responsibility for the ownership of the goods.
What is FOB?
FOB is an acronym that stands for “Free on board” or “Freight on Board”. It is simply a term used to indicate when liability and ownership of goods are transferred from a seller to a buyer. It tells who takes responsibility for the cost.
This term basically relates to importers, shippers, freight forwarders, and anyone with a connected interest in Sea shipping.
We have come across individuals in the shipping industry confused about the exact meaning of FOB, even though they tend to have good knowledge of several other freight shipping terminologies.
Why FOB Matters to your Business
You will more likely consider Free on Board an important for your business if you are into a business consistently shipping a lot of goods. It matters because it will aid your knowledge of who is liable for the safe delivery of, and who owns the goods at any given point. It also serves as well to provide information for officers like the Accountants.
Difference between FOB Origin and FOB Destination
FOB Origin and FOB Destination are two important concepts in international trade. However, the two terms have different meanings, and it is important to understand the difference between them.
When an order is marked “FOB origin,” it refers to the place where goods are shipped from. It means that ownership passes to the buyer once it leaves the seller’s hands. If shipping is necessary to deliver the goods to the buyer, the buyer will contract for the shipping and pay for them.
On the other hand, FOB Destination refers to the place where goods are shipped to. When products are delivered to the buyer’s doorstep, they are referred to as “FOB destination.” The seller is responsible for organizing and paying for transportation to the buyer (though the seller may charge the buyer for those transportation charges), as well as any damage that occurs while the items are in transit.
The main difference between FOB Origin and FOB Destination is that FOB Origin simply refers to the place where goods are shipped from, whereas FOB Destination refers to the place where goods are shipped to.
FOB Shipping Point
This is the most common shipping term used to describe the point at which a seller’s obligation to deliver goods passes to the buyer. At this point, the seller has fulfilled its contractual obligations and can no longer be held liable for any loss or damage that occurs to the goods after they are delivered.
The FOB shipping point can be either a factory or warehouse or it may be a seaport or airport. The important thing here is that the FOB shipping point is determined by the seller and not by the buyer.
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