What Does FOB Mean in Shipping?

13 Feb 2020 Freight Shipping

Getting to know what FOB means in shipping will provide you with a better understanding of how certain shipping documents work. At C&D Logistics, they want to ensure that our customers have all of the information they need about our freight shipping services. That is why their team members will always take the time to answer any questions you might have about our services or about freight shipping in general.

What Does FOB Stand for?

FOB is an acronym that stands for “free on board”, which is a shipping term used in retail to indicate when liability and ownership of goods is transferred from seller to buyer. Free on board terms of sale are designed to establish which party is responsible for the transportation costs, which party is liable for goods damaged during transit, which party controls the movement of the goods, and when the title passes from the seller to the buyer.

How is FOB Used in Shipping Documents?

FOB can be used in four different ways in freight shipping:

  • FOB [place of origin], freight collect
  • FOB [place of origin], freight prepaid
  • FOB [place of destination], freight collect
  • FOB [place of destination], freight prepaid

The first part of each designation determines where the buyer takes control of the title of goods and assumes the risk of damage from the seller—either when the carrier picks up the goods for delivery or at the time of the actual delivery. The second part of each designation indicates who is responsible for the freight charges. “Prepaid” means that the seller has paid for the freight transportation, while “collect” means that the buyer is responsible for paying for the freight transportation.

Importance of FOB

The most important reason for using FOB is to make it easier for shippers and carriers to understand FOB designations in the event that goods are damaged during transit. While some receiving docks will try to refuse delivery of obviously damaged goods rather than accepting a damage notation for future claims against the carrier, a shipment that has been designated “FOB [place of origin]” technically belongs to the buyer at the time that it is shipped. This means that the buyer would be refusing delivery of goods that they legally own and that the seller has no legal obligation to accept the goods back.

If you would like to learn more about what FOB means in shipping, or if you are interested in one of their shipping services, please contact C&D Logistics at 604-881-4440 or by filling out a contact form on their website. You can also stay up to date on the latest news by following them on Instagram, YouTube, or Facebook.