What is Freight On Board – Here’s Everything, You Should Know Documentations are considered
Very important for the process of export and delivery. It can be useful for both international or domestic transportation. However, the type of documentation you need varies with the destination of the shipment. Now, if you talk about the domestic shipments, three documentation types pop up as the key elements to remember –
- The Bill of Landing
- The Freight Bill
Free On Board or Freight On Board (FOB)
FOB is referred mostly to retailers on almost every document produced by them. It also includes the invoice. Here in this article, we are going to discuss everything about FOB. So, you’ll get to learn what is Free On Board, its history, and terms. It will help you handle your shipments more efficiently.
What is Freight On Board?
Free On Board or Freight On Board, which is also known as FOB, is a retail shipping terminology, refers to who is responsible for making the payment for transportation charges. This is where the merchandise’s possession is transferred to the buyer from the seller while the seller pays the freight and the buyer receives the title after the shipment. The transportation costs are paid by the buyers.
The FOB determines the number of vital aspects of a shipment such as:
- Whether the vendor or retailer is accountable for paying transportation costs.
- Whether the vendor or retailer will control the movement of goods.
- The time and date when the title will be passed to the buyer.
Delivery companies or freight hauliers are not involved in most of the cases, but the freight haulier (like Conway, UPS, FedEx, etc.) can be found responsible as well! However, the damage during transportation or shipment is always the accountability of the freight haulier.
History of Free On Board
The transfer of liability and title between sellers and buyers were the historical references of FOB. It exclusively used to allude transportation by ship in the past but the term has been transformed and expanded when the transportation was mainly possible through sea commerce.
One vital aspect of FOB cannot be ignored as it helps in determining which party (seller or buyer) possesses the freight during transportation. In the case of any loss or damage to the freight, the insurance policy of the owner comes in handy. Thus, one should always be aware of the terms and conditions. The party shall aware itself about who takes the responsibility of the shipment on eac every single step of the journey.
Some Important FOB Terms and Their Significations
When you are dealing with Freight On Board, it’s important that you know about the terms and conditions of FOB. Otherwise, you can get into legal trouble or you commodify can be harmed! Well, we are here to make you fully aware of the FOB terms and conditions, so that you can proceed further with the utmost knowledge.
FOB Delivered: When the terms of Freight On Board point to “FOB Delivered,” that simply signifies that the cost of the carrier will be taken care by the shipper.
FOB Origin: When the Free On Board terms point to “FOB Origin,” it denotes that the buyer will take care of all the transportation expenses from the shipping place to the final arrival spot.
Freight Collect: This term signifies that the freight charges are the buyer’s responsibility and the buyer will be liable for the required insurance claim filing.
FOB Destination, Freight Collect: When the term includes this phrase, it means that the title and control of the shipment are held by the seller until the delivery while the freight charges are buyer’s responsibility.
FOB Destination, Freight Prepaid: With no insurance claims, this term states that the seller holds the possession until the final delivery. The seller is also liable for the freight charges.
Why FOB Terms Are Important to Know
Until you know the FOB terms precisely and with details, you can run into trouble in terms of unforeseen fees and charges. Moreover, when you know what is Freight On Board and what its terms are, it will help you evaluate your whole transaction and prepare yourself for any possible outcome. On top of that, you should prioritize the dates as well as they have a considerable impact on the pricing of the goods. There are cases with longer payment terms but the start date is always based on the FOB date.