Understanding FOB

If you’re new to the shipping world, you’re likely to come across many terms and acronyms that are unfamiliar, like bill of lading (BOL), less than truckload (LTL), and FOB. FOB can mean either “free on board” or “freight on board.” Internationally, the first term is used, whereas in the U.S., either may be used. It’s crucial for shippers and recipients to understand FOB because it defines the point at which ownership and liability is transferred from one party to the next.

Definition of FOB

Free on board is a way of determining whether the seller (the consignor) or the buyer (the consignee) is responsible for paying the shipping fees and assuming liability for any goods that have sustained damage during transit. FOB will also determine at which point the title for the shipment is transferred from the seller to the buyer.

Types of FOB

The shipping industry in the U.S. uses four different types of FOB. They are as follows:

  • 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 place of origin or place of destination determines when the buyer takes control of both the title of the goods (their ownership) and the liability for any damages. A FOB with a “place of origin” designation establishes that the buyer officially has the title to the goods when they are picked up by the shipping carrier. A FOB with a “place of destination” designation means the buyer won’t receive the title or the liability until the goods are actually delivered. If the FOB is “freight collect,” then the buyer is responsible for paying the shipping charges and dealing with a freight claim in the event of damage. If the FOB is “freight prepaid,” then the shipper is responsible for the shipping charges and filing claims if necessary.

If you need clarification on any type of freight shipping issue, you can contact the helpful staff at Xcel Delivery Services. We’re available in Phoenix at (602) 368-1300 to assist you with your shipping needs. Our transportation company offers prompt and professional freight, expedited freight, medical courier, and local delivery services.

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