If the buyer is to pay the freight costs of delivering merchandise, delivery terms are stated as
- A) FOB shipping point
- B) FOB destination
- C) FOB n/30
- D) FOB buyer
The FOB (Free on Board) shipping point entails that the buyer is responsible for paying for freight for delivering the goods, and once the goods are loaded onto the shipping vehicle at the origin (i.e., the shipping point), ownership of the goods transfers to the buyer. Shipments are the seller’s responsibility, but transportation from the shipping point to the buyer’s destination is the buyer’s responsibility.
In the shipping industry, FOB (Free on Board) is used to describe when ownership of goods is transferred from the seller to the buyer. Shipping points are where goods are loaded onto shipping vehicles and are known as “FOB” (Free on Board).
FOB shipping point refers to the shipping method of transporting goods from the shipping point to the buyer’s final destination. The buyer is responsible for arranging and paying for the freight costs. Once the goods are loaded onto the shipping vehicle, the buyer assumes liability for loss or damage during transportation. The seller is responsible for getting the goods to the shipping point.
If there is a need for customs clearance, the buyer will be responsible for arranging and paying for the customs clearance and insurance costs. In contrast, it is the seller’s responsibility to deliver the goods and load them onto the shipping vehicle at the shipping point.
When goods have to be shipped over a long distance or when the seller and buyer are in different locations, this term is often used. When the buyer uses this term, the shipper arranges and pays for transportation directly on behalf of the buyer, instead of the seller.