What Does FOB Mean In Freight Shipping?

Once the ship or vessel receives the goods, the responsibility of the seller is over. Now the goods or shipments become the responsibility of the buyer. Now, if the shipment is damaged or someone stole it, then it becomes a financial loss for the buyer, not the seller.

Another reason companies should be acutely aware of free on board terms is that FOB establishes when the goods become an asset on the buyer’s balance sheet. This becomes especially important if a transaction occurs close to the transition from one accounting period to the next, such as the end of a calendar or fiscal year. Since there is more than one set of rules, and legal definitions of FOB may differ from one country to another, the parties to a contract must indicate which governing laws are being used for a shipment. Free on Board is a term used to indicate who is liable for goods damaged or destroyed during shipping. For example, if you import high-value items like electronics or jewelry, DDP may not be an ideal option because it can leave you with large customs duties to pay when you cross borders.

History and Etymology for fob

They provide expertise, design, installation, onsite support and more. Abbreviated trade terms can be confusing, but this acronym is an important one to know. A Letter of Indemnity is a document protecting the cargo owner from losses…

Cargo haulage refers to the whole or part of the ocean transportation of your ca… A port of discharge is a place where a vessel discharges or unloads some or all … FOB means Free On Board and is one of the most used Incoterms. COO is an acronym used in logistics, which means ‘Change of Origin’. Ocean transportation is any movement of goods and/or passengers using seagoing v…

Why Is FOB Important to Small Business Accounting?

The FOB shipping point is an important term to understand in a contract, as it can significantly affect how much you pay for packing materials and insurance. By using a digital application for this type of transaction, companies can instantly — and securely — log and share FOB transfer information. This can save a ton of time and eliminate disputes and finger-pointing https://accounting-services.net/ if items are damaged during transport. As you can see, there are several important legal issues that can arise during shipping. For this reason, a driver should never depart from a shipping dock without a clear understanding of the FOB situation at hand. Otherwise, bad things can happen, ranging from disagreements to futile efforts and irate customers.

For example, if a company was shipping its goods to New York City, it would be written out as FOB New York. If you’re new to importing, CIF is easier than arranging shipping and insurance yourself. However the shipper’s arrangements often cost more than you’d pay FOB. The buyer pays for the shipping charges and insurance and is responsible for the cargo at the point of origin. FOB legally determines at what point responsibility is passed. The agreed-upon FOB settles any legal or communication concerns with regards to possession and liability. While you may not need to know the full meaning of FOB in your everyday interactions, it is important to understand when handling shipments.

Who Pays For FOB?

To fully grasp the concept, it’s important first to understand the difference between place of origin vs. place of destination and freight collect vs. freight prepaid. David pays the shipping cost, and the jars are shipped FOB ABC LTD. . On the way to David’s store, the truck meets with an accident that damages the jars. David tries to sue ABC Ltd., but he cannot because the title has already passed to him as soon as the jars were loaded on his truck.

Ownership of a cargo is independent of Incoterms, which relate to delivery and risk. In international trade, ownership of the cargo is defined by What Does FOB the contract of sale and the bill of lading or waybill. By denoting who “owns” the shipment, there is no ambiguity in responsibility of shipment.

What is FOB is Shipping Point?

They also assume all risks and are responsible for filing claims in the case of loss or damage. Under delivered duty paid , the seller is responsible for the cost of transporting goods until customs clears them for import at the destination. This becomes a significant issue at the end of a reporting period when the company wants to report sales revenue for financial statements. At these cut-off periods, operations personnel and accountants must investigate the delivery status of shipped goods to determine revenue.

That inventory then becomes an asset in the buyer’s accounting books even though the shipment hasn’t yet arrived. Another alternative is to ask the seller for CIF – cost, insurance and freight. If you’re buying goods from overseas, FOB shipping point, your insurance typically covers your shipment after it’s on the vessel.

How to record FOB shipping point?

Meaning you still carry your sense of fashion from your country which clashes with the current countries cultures. A Fob is a male or a group of males who all hang out in their obnoxious fuck boy outfits.

What does DAP mean in shipping?

Under the Delivered At Place (DAP) Incoterms rules, the seller is responsible for delivery of the goods, ready for unloading, at the named place of destination.

The above example shows both the cases of FOB ORIGIN and FOB DESTINATION. Both of these terms are standard and most used FOB terms. It is important to remember that under the uniform commercial code , if the purchase contract does not specify any FOB term, then it is to assume the transaction terms are of FOB origin. Would you like to organise freight shipping and have the full support of a logistics expert? Talk to us and receive dedicated support and exclusive prices. Many warehouses or premises that they would want to deliver to and don’t have a central location to work from. Organizing their own shipping would mean they can deliver to numerous locations without incurring additional costs, or causing confusion for the seller.


The buyer assumes responsibility for the goods from the point of origin. An advantage for the buyer of FOB would be that they can organize the best way to deliver the shipment. This means that they can get a good deal on freight services and not have to rely on the seller’s chosen delivery method. A seller also gains from Free on Board as it is one less thing to worry about in the purchasing process. If a buyer takes responsibility for a shipment when they purchase it the seller doesn’t need to price up delivery routes, sort out export taxes, etc, so the process is a lot simpler for them.

CIF vs. FOB: What’s The Difference? (2022)- Alibaba.com – Alibaba.com

CIF vs. FOB: What’s The Difference? ( – Alibaba.com.

Posted: Thu, 16 Sep 2021 07:00:00 GMT [source]

To better understand the difference between free on board and freight on board, the freight on board meaning is not an official one and is often used in place of free on board. In its most basic meaning, freight on board is a term that signifies a seller is required to deliver goods to a buyer through a shipping vessel. More likely than not, when you’ve shipped something, you’ve come across the FOB acronym.

Understanding FOB Terms

«FOB Los Angeles» says you assume ownership after the goods are loaded on the boat or plane. If they’re damaged or lost, the seller has no responsibility to reimburse you. Be mindful of the differences between free on board and CIF agreements.