what is fob

Some vendors will offer longer terms for payment, but the start date is based on FOB date. When items are transported either domestically or internationally, the delivery must be accompanied by relevant documentation. The amount and type of documentation vary depending on whether the shipment is within the United States or to another country. The buyer must instruct the seller on the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. Free on Board is a term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments. “Freight collect” refers to the legal fact that the buyer is responsible for the freight charges.

Store Door , also known as Carrier Haulage is where the carrier bears the re… Seven steps you can use to improve the shipper-carrier relationship and ultimately benefit your business. Judicial Committee of the Privy Council, Colonial Insurance Company of New Zealand v The Adelaide Marine Insurance Company , UKPC 57, 18 December 1886, accessed 2 March 2021. Sometimes FOB is used in sales to retain commission by the outside sales representative. If the same seller issued a price quote of “$5000 FOB Miami”, then the seller would cover shipping to the buyer’s location. Investopedia requires writers to use primary sources to support their work.


Ocean freight will likely take anywhere from days, depending on where the … Shipping is the physical moving of good from one point to another, such as the m… This person or entity is the shipment receiver and generally the owner of the sh… A Letter of Indemnity is a document protecting the cargo owner from losses… As the world is well aware now, keeping the supply chain moving efficiently impacts every aspect of the global economy. Freight on board is another term that is often used in place of free on board.

The personal relationship will provide flexibility for difficult situations. With this new awareness, the distributor rectified the problem by adjusting the purchase fob shipping point terms for future orders. Fortunately for this distributor the vendor had agreed to accept the goods back into inventory, even though they had no legal obligation.

What is the Difference Between FOB and CFR?

In this case, the vendor with most refused shipments set “F.O.B. This meant that even though the vendor was paying the freight transportation cost, the distributor owned the freight from the time the shipment was tendered to the carrier. That puts responsibility of loss or damage with the receiver. By refusing these shipments, the distributor was returning something that it actually owned.

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. “FOB Destination” means the seller retains the risk of loss until the goods reach the buyer.

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In other words, carriage costs are the buyer’s responsibility with FOB and the seller’s responsibility with CIF. In a CIF transaction, liability passes to the buyer after the goods are placed on the ship at the port of export, while the seller’s liability stops at the port of destination. You may come upon cost, insurance, and freight and FOB in dealing with international sending contracts. Whichever party pays for sending will have to enter those costs in the ledger, too.

– sometimes forwarders will want to know if they will be handling the end-to-end aspect of the service, or if a local trucking company might take over. In most instances, it is best to have your freight forwarder handle everything, so you have less moving pieces to cause worry. However, the vast majority of the quotes you will receive from sellers in China will be under FOB Incoterms. If you look at a quotation, you will usually see the unit price, FOB as the Incoterm, and a Chinese city, the shipping point.

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