Errors on your bill of lading can often lead to shipping costs that you may not be responsible for, so w ith proper knowledge of these terms and shipping consulting , you can protect yourself from overspending. The first is that free on board is not the same as freight on board. Freight on board is not a term used or defined in the two sets of recognized domestic and international codes: Incoterms and the Uniform Commercial Code UCC.
These are the codes regulating shipping terms. Assume that FOB refers to free on board. The other clarification is that FOB can be defined in international trade and U. Incoterms is updated each decade, with the Incoterms published in late Incoterms are agreed-upon terms that define transactions between shippers and buyers, so importers and exporters can speak the same shipping language.
While Incoterms can apply to international trade and domestic shipments, UCC is primarily used for domestic shipments. Image courtesy of Wikipedia. As soon as the goods arrive at the transportation site, and are placed on a delivery vehicle, or at the shipping dock, the buyer is liable for any losses or damage that occur after.
The buyer would then record the sale, and consider their inventory increased. With FOB shipping point, the buyer pays for shipping costs, in addition to any damage during shipping. The buyer is the one who would file a claim for damages if needed, as the buyer holds the title and ownership of the goods.
As an example, U. The cargo arrives at the receiving dock and the buyer takes ownership and liability. The watch glass breaks during transport overseas. The buyer is responsible, even though the watches were damaged before arriving on U. Freight Prepaid:. Freight collect means the person receiving the shipment is responsible for all freight charges. They also assume all risks and are responsible for filing claims in the case of loss or damage.
Freight prepaid is the opposite. The shipper accepts responsibility for all freight charges and risks. FOB is important for a number of reasons, but most importantly, shippers and carriers need to understand FOB designations in damage situations.
Some receiving docks will refuse delivery of obviously damaged goods, rather than accept with a damage notation for future claim against the carrier.
So, the consignee would be refusing delivery of goods it legally owns and bears the risk for. The seller has no legal reason to accept those goods back and the return shipment could possibly result in additional damages.
If all of this seems too confusing to follow, see how Freightquote by C. Robinson can help handle the placement of your shipment for transport. The legal issues raised in FOB designations are nothing new to us here at Freightquote. By utilizing our easy-to-use self-service tools, you can efficiently manage your shipping strategy, should any issues arise. Get Free Quotes. Expert freight shipping tips and fast, easy tools to help you ship freight.
Seven steps you can use to improve the shipper-carrier relationship and ultimately benefit your business. Get cost savings tips, instant quotes, and new ideas to help streamline shipping for your small business. Search Search. FOB Shipping Point 1 minute read.
Free Alongside, which means that the seller must deliver goods on a ship that pulls up next to a ship of a certain name, close enough that the ship can use its lifting devices to bring it onboard. Free Carrier, which means that the seller is obligated to deliver goods to an airport, shipping port, or railway terminal where the buyer has an operation and can take delivery there.
Delivered Ex Ship, which requires the seller to deliver products to a particular shipping port, where the buyer will take delivery on arrival. Ex Works, which only requires the seller to get products ready to be shipped from its location. The buyer is responsible for making any arrangements for shipment and for picking the goods up.
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