Free on Board, or FOB, is a term used in shipping to define when the product's ownership transfers from the seller to the owner. The transfer of ownership typically occurs when the product leaves the seller's premises but can also occur at other points in the shipping process, such as when the product is loaded onto the buyer's transport. FOB can also be used to define who is responsible for paying shipping costs. In most cases, the seller is responsible for shipping costs up to FOB, and the buyer is responsible for shipping costs after that point.
There are many variations of FOB, so it's important to clarify which one is being used before entering into a contract. The most common interpretations include FOB shipping point, destination, and origin.
- FOB shipping point means that ownership of the product transfers to the buyer when it leaves the seller's premises, regardless of whether the buyer is paying for shipping. In this case, the seller ensures that the product is adequately packaged and insured for shipping.
- FOB destination means that ownership of the product only transfers to the buyer once it arrives at its final destination. This is often used when the buyer is paying for shipping. In this case, it's up to the seller to ensure that the product arrives safely and on time.
- FOB origin means that ownership of the product transfers to the buyer as soon as it leaves the seller's premises. This is often used when the seller is paying for shipping. In this case, it's up to the buyer to ensure that the product arrives safely and on time.
It's essential to clearly define which variation of FOB is being used before entering into a contract, as it can significantly impact who is responsible for shipping costs and the risk of damage during shipping.
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