In F.O.B. shipping point, title and ownership of goods are transferred from seller to buyer at the point of shipment. On the other hand, in F.O.B. destination, title and ownership of goods are transferred at what is f.o.b. shipping point the place of delivery agreed upon by the buyer and seller. This means that the seller bears the risk of loss or damage during transit in F.O.B. destination until the goods arrive at the buyer’s location.

Free on Board FOB (FOB) Incoterms® 2020 Rule

Buyers and sellers often confuse FOB by understanding the shipment can be sent by any mode of transportation; this is not correct. The International Commerce Center (ICC), explains FOB is only viable for sea and inland waterway shipments. When not shipping via sea, buyers and sellers could consider FCA as a comparative Incoterm which works for all modes of transport. It is important to note that the choice between F.O.B. shipping point and destination can have significant implications for both the buyer and seller. For example, if the buyer chooses F.O.B. destination, they may have more control over the shipping process and be able to ensure that the goods arrive in good condition. However, this may also result in higher shipping costs, as the seller will need to bear the risk of loss or damage during transit.

How to Negotiate F.O.B. Shipping Point Terms with Suppliers

The buyer is also able to delay ownership until the goods have been delivered to them, allowing them to do an initial inspection prior to physically accepting the goods to note any damages or concerns. For example, let’s say Company ABC in the United States buys electronic devices from its supplier in China and signs a FOB shipping point agreement. Company ABC assumes full responsibility if the designated carrier damages the package during delivery and can’t ask the supplier to reimburse the company for the losses or damages.

FOB destination, freight collect

For small products that will inevitably be shipped by air, or small suppliers with little experience working with international buyers, you may receive quotations in EXW Incoterms. 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. Below we have included a list of the route timelines and estimated rates to ship standard containers via FOB from China. We recommend buyers consider FOB Incoterms when they wish to use a China Freight Forwarder to organize their shipments. We suggest this because FOB will offer low unit pricing for the cargo sold while also allowing the seller to take partial responsibility for the freight for as long as it remains within their country.

It is important to note that FOB does not define the ownership of the cargo, only who has the shipping cost responsibility. So, let’s delve into these sea shipping Incoterms to gain an understanding of their roles in facilitating global trade. Each of these terms carries distinct implications for ownership, liability, and costs in the supply chain. Beyond the fundamental concepts of FOB shipping point and FOB destination, there are several specific FOB terms that businesses may encounter in their shipping agreement. FOB shipping point designates a specific point—the shipment point—where ownership and risk transfer from the seller to the buyer.

While it is customary for the buyer to arrange insurance, this is often negotiated before confirming the sale. Shipping via FOB Incoterms from China is simple, straightforward, and the ideal way to ensure your products leave China safely and arrive at your destination seamlessly. If you would like to be sent a custom rate for your next shipment from China, request a shipping quote, and we will send you a detailed offer. Further, if the seller requests that the buyer provide any information or documents in relation to customs clearance, then the seller must pay the buyer for these costs.

• When you agree to receive items under FOB shipping point terms, it’s essential to be aware of your liabilities.
• In addition, sellers are typically responsible for freight charges, which adds to their overall costs.
• The buyer pays for the shipment, but the seller remains responsible for the goods until delivery.
• Generally, FOB is generally specified in a sales agreement and is accounted for under inventory costs.
• If a shipment is sent under FOB destination terms, the seller won’t record the sale until the goods reach the buyer’s location.
• Shipping costs are usually tied to FOB status, with shipping paid for by whichever party is responsible for transit.
• Of the 11 different incoterms that are currently used in international freight, Free on Board (FOB) is the one that you will encounter most frequently.

It means that a seller pays for all shipping costs and that a transaction is not complete until the goods reach the buyer’s destination undamaged. In this case, the seller is responsible for loading the goods onto the carrier and arranging for transportation. The seller also assumes responsibility for the goods during transit, including liability for any damage, loss, or delay. If the goods are damaged or lost in transit, the seller must file a claim with the carrier or their insurance company.

FOB Shipping Point is commonly used in international trade, where goods are transported across long distances. It allows the buyer to have more control over the transportation process and choose their preferred carrier and shipping method. However, it also means that the buyer bears the risk of any issues that may arise during transportation, such as customs delays or damage to the goods. At this point, the legal title, the rights that come with that title, and risk of loss passes from seller to buyer. Real-time tracking of the shipment is also crucial to ensure timely delivery and avoid unnecessary delays.

LEARN MORE ABOUT INCOTERMS

• The seller does not have the risk beyond the delivery point, so it has no obligation to the buyer to arrange a contract of insurance.
• However, the vast majority of the quotes you will receive from sellers in China will be under FOB Incoterms.
• FOB shipping point, or FOB origin, means the title and responsibility for goods transfer from the seller to the buyer once the goods are placed on a delivery vehicle.
• With FOB Destination, the seller is responsible for the goods until they reach the buyer’s location.
• Buyers and sellers often confuse FOB by understanding the shipment can be sent by any mode of transportation; this is not correct.