Goods in Transit FOB Shipping Point Overview: What is FOB in shipping? FOB is an International Commercial Term (Incoterm), a predefined commercial term meant to reduce confusion between sellers and buyers about ownership transfer points and. responsibility for shipping costs, Otherwise, if a shipment is damaged or lost in transit, contentious, and expensive, legal wrangling could ensue to determine financial responsibility. FOB benefits include: * Defining the transaction between seller and buyer + Identifying costs, responsibilities, risks, and tasks ‘© Specifying shipment logistics and transportation management The two major FOB types are FOB shi; in depth below. jing point and FOB destination, which we'll discussFree on board shipping vs. free on board destination: What's the difference? ‘Two differences distinguish FOB shipping point from FOB destination: which party pays for shipping and the point ownership of goods transfers from seller to buyer. Buyer pays for shipping and owns the goods once they ship. jon: Seller pays for shipping and owns the goods until delivery. Let's say you're in Dallas and purchase a bulk order of widgets from a San Fran: wholesaler. An "FOB San Francisco” shipment means you're responsible for shipping them from San Francisco to Dallas and own the goods when the shipping company picks them. up. sc. ‘An “FOB Dallas” shipment means the wholesaler will cover shipping costs and owns the goods until you receive them, Other FOB options include: + FOB shipping point, freight prepaid: The seller pays for shipping; the buyer assumes responsibility for goods at the point of origin. + FOB shipping point, freight prepaid and charged back: The seller doesn’t pay for ping but adds that cost to the invoice sent to the buyer. who assumes respons for goods at the point of origin. + FOB destination, freight prepaid and charged back: The seller pays for shipping, but the buyer deducts that cost from the original invoice, which includes the shipping paid for by the seller. + FOB destination, freight collect: The buyer pays for ship; in transit. + FOB destination, freight collect and allowed: The seller adds shipping to the invoice, and the buyer pays that cost, but the seller assumes the responsibility for goods until delivery. ity 19, but the seller owns goods Each option has pros and cons, depending on your specific situation, as we'll discuss in the next sectionFOB shipment risks The risks relate to your tolerance for liability. Can you handle the logistics of shipping as ‘well -- or better --than your supplier? Are there in-transit security issues you don't want to be responsible for? Do you have enough slack built into your inventory control processes to tolerate a lost or delayed shipment? If you know the risks and aren't willing to bear them, FOB shipping point may not be your best option, Don't get me wrong: Choosing your own logistics or transport company for shipping will likely be cheaper and get your goods safely to you. But, like every other vendor you use, do to make the research necessary ~ an informed choice. ifferent shipping options, costs, terms, and supp!