Lets talk about shipping terms and where the responsibility lies for a shipment. The correct definition for FOB Point is Free-on-Board aka freight on board and the term FOB is often misunderstood, even by the professionals.
The FOB point is important as it ascertains:
- when legal title of the goods being shipped transfers to the buyer. Say you were purchasing a bulk liquid like a fuel or a chemical, the FOB point could be origin, destination, buyers tank or even the intake nozzle at point of delivery. As you can see, depending on the commodity, having the proper FOB point is crucial.
- who is responsible for handling damaged goods or freight claims with the carrier in the event they are lost or damaged during shipment. An example: FOB Destination, Freight collect means: Buyer — Pays and is responsible for freight charges, Seller — Owns goods in transit, Seller — Files any damage claims (if any). Another potential headache area so choose wisely.
- who pays the carrier.
Many will suggest or argue that FOB destination is the most beneficial because