What does freight fob mean

In fact, FOB is one of the most important terms to know in commercial law. An FOB agreement designates whether a seller or a buyer is responsible for items during shipping — and when their responsibility ends. Depending on the context, FOB can either mean free on board or freight on board.

Generally speaking, there are four types of FOB agreements used in North America, which we describe next. But first, let's get some terminology straight. Very simply, there are two parts of each type of FOB agreement. The first part designates whether the buyer assumes liability for the shipment at the point of origin or at the destination. The second part designates whether the seller prepays the freight charge or if the buyer pays on delivery.

Legally, this also means that the buyer assumes full responsibility for all freight claims in the event goods are damaged during transit. The seller prepays the freight charges. In this arrangement, the buyer assumes responsibility for all freight charges and pays on delivery. However, the seller chooses the shipping company that will be responsible for getting the items safely from point A to point B.

Once the transfer is complete, the seller is no longer liable in the event the products get damaged. The seller prepays and is then fully responsible for any and all additional freight charges that arise under this arrangement. For this type of transaction, the seller chooses the shipping company and retains full control of the items until they reach the customer.

However, the buyer is on the hook for the freight costs that accrue during transport and pays when the items reach their destination. UDP may be offered as single-zone pricing, also called postage stamp pricing, where all customers pay the same price regardless of their geographical distance from the seller. After all, FOB agreements primarily involve the buyer and the seller.

So why should trucking companies focus their attention on them? FOB agreements are critically important to trucking companies. Even those in the shipping industry with knowledge of freight shipping terminology often are confused as to the true meaning.

The FOB shipping terms have both legal and accounting implications for the buyer and seller. FOB helps determine when liability, risks, costs, and ownership of goods transfers from the seller to the buyer.

It determines two key facets:. The agreed-upon FOB settles any legal or communication concerns with regards to possession and liability. They differ in who assumes responsibility for the goods during transit.

Thus, it's important to be clear about the terms and know who is responsible for the shipment at every stage of its journey.

Any vendor-client transaction should have the FOB terms spelled out very clearly in purchase orders. It's best for a retailer to have a standard set of terms that can be negotiated on a per-vendor basis.

This will save headaches and cost down the road. There are a few variations of FOB terms to be aware of:. It's important to understand the specifics of the FOB terms so all parties know what is expected and who will be responsible for unforeseen charges and fees. It's also important to consider your dating as well. Some vendors will offer longer terms for payment, but the start date is based on FOB date.

This ultimately impacts the cost of goods. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads.