That’s because the rail concept, as well as FOB, goes back to the early days of sailing ships. The earliest ICC guidelines were published in 1936, when the rail was still used – goods were passed over the rail by hand, not with a crane. Incoterms last included the term “passing the ship’s rail” before its 2010 publishing. As soon as the goods arrive at the transportation site, and are placed on a delivery vehicle, or at the shipping dock, the buyer is liable for any losses or damage that occur after.

When calculating the overall cost of goods, freight charges can become quite substantial. The rates for these freight charges will fluctuate depending on the transportation mode used for transit, the cargo’s volume, as well as the type of goods being shipped. The buyer assumes all risks and benefits of ownership as of the moment the shipment arrives at the shipping dock. Also, under FOB destination conditions, the seller is liable for the merchandise’s transportation costs. FOB shipping point transfers the title of the shipment when the goods are placed at the shipping point. This is usually the seller’s loading dock, delivery truck, or postage office.

FOB Shipping Point, Freight Prepaid and Charged Back

The seller has packaged the goods and shipped the merchandise on a specified date. Now that we’ve cleared that up, it’s time to set sail and ensure we’re all on the same page regarding the FOB shipping point. If you’re a buyer or seller interested in using the FOB address, you may wonder how to manage the process effectively. Strikingly is an all-in-one platform that can help you create a professional-looking website, order your shipping process, and even sell your products online. But first, let’s clarify the difference between the FOB shipping point and the FOB warehouse destination. Strikingly loves the idea of keeping our users well-informed about how they run their business online.

If there are any damages to the cargo enroute, the buyer needs to take relevant measures like filing for reimbursement claims. Since the shipment becomes the buyer’s responsibility, the seller has no further role in the process. On the other hand, the accounting rules are different when operating under FOB destination. Here, neither the buyer nor the seller can claim the difference in inventory until the goods have reached their final destination. The term FOB is also used in modern domestic shipping within North America to describe the point at which a seller is no longer responsible for shipping costs.

What is FOB shipping point and FOB destination?

This is also the moment that the supplier should record a sale since they’re taking ownership at the receiving dock. It’s common for high-value goods to be sent via FOB destination designation. That allows the buyer to ensure they arrive in good condition and can be inspected upon receipt. The seller retains liability until the buyer accepts the goods, ownership, and liability at the receiving dock, office or agreed-upon place of transfer, after inspecting for damage. The expansion of the global market and the rise of e-commerce has led to some interesting challenges for international shippers.

When legal ownership of a shipment changes hands, the goods also become part of someone else’s inventory. Even though a shipment may not even be at your loading dock yet, FOB shipping point means that they are technically part of your inventory. Some companies, particularly at certain times of the year, may want to control this. With this specific configuration, the title of the goods transfers from the seller to the buyer once the goods are shipped. Even so, the liability is still on the shipper until the goods arrive at the final destination. Assume that a seller quoted a price of $900 FOB shipping point and the seller loaded the goods onto a common carrier on December 30.

Other shipping terms

International commercial laws have been in place for decades and were established to standardize the rules and regulations surrounding the shipment and transportation of goods. Having special contracts in place has been important because international trade can be complicated and because trade laws differ between countries. Since the package was shipped using shipping point, the title of the goods transferred when GM placed the package on the loading dock.

As mentioned, the buyer assumes responsibility for all shipping costs from the FOB address to the final FOB warehouse destination. If you’re the buyer, ensure your treasure chest is ready to cover those expenses. Sellers can enjoy control and flexibility over their precious cargo by designating their warehouse or shipping point as the FOB location.

More Definitions of FOB Shipping Point

That said, FOB shipping point can also default to just being an FOB origin if the specifics are not clarified. Keep reading to learn more about this crucial shipping term so that you don’t get stuck footing the bill on your own. In this article, we’ll cover everything you need to know about FOB shipping points, including their definition, importance in the shipping industry, and how it affects shipping fees and the transfer of ownership.

• FOB shipping point terms indicate that the buyer assumes ownership of the goods as soon as they leave the supplier’s location.
• FOB destination, on the other hand, would not have recorded the sale until the package was delivered.
• It’s like being a pirate and taking control of the ship without any swashbuckling required!
• Start by consulting with an experienced logistics service who will help you weigh these and other factors.
• As we already have seen with FOB, sellers do not assume much responsibility unless it is the FOB destination.
• For example, on the shipping rule you can set it to flat rate per item, by order weight, or even store pickup.

For an ecommerce business owner like you, it is a must to know and get full understanding of the International commercial laws, especially if your business is catering to overseas customers. FOB shipping point agreement and FOB destination are just two of the International commercial terms that every seller or buyer must be aware of. Ideally, as a business owner, you need to know the FOB shipping meaning that we discussed above. For buyers, understanding what is FOB point and its impact can help them determine their legal rights and responsibility if the shipment gets damaged or lost while being shipped.

If a shipper sends out freight, but that freight never arrives at the customer, the shipper is responsible for either replacing or reimbursing the cost of the goods. The term free on board (or freight on board) simply refers to freight that is being shipped over water instead of land or air. About 90 percent of all global freight is shipped via ocean and sea freight. More and more small businesses are now relying on freight to transport their goods from one region to another. Although FOB shipping point and FOB destination are among the most common terms, there are other agreements that vary from these two.

While ecommerce business is one of the best opportunities for people who are passionate about serving the world with the best products and services, it is with greater importance to get into honorable agreements. Having said that, we take FOB shipping point great honor to serve you with the best web services and tools you need to start your ecommerce business now. Since the buyer takes possession of the items at its receiving dock, that is also where the seller should document a transaction.