FOB Meaning and Why Your Online Business Needs To Know About It
Leave your Logistics to the Experts
Get Freight Shipping QuotesWhatever your business creates, it’s important to know that you’re protected when you ship your goods to the buyer in case something happens during delivery. The term FOB, or Free on Board, refers to a policy that decides exactly when the seller gives up ownership of an item to the buyer.
Having a FOB policy in place is important not only for your business but for your customer if they need to file a claim. As the first online shipping marketplace helping shippers and transporters deliver large and bulky goods anywhere, uShip can help you arm your business against risk on the road.
FOB Meaning in Action
Let’s say you run a furniture store on Etsy. Even if you’ve done your due diligence to pack your goods with care, something could happen to your high-value inventory on the way to your customer.
With an FOB policy in place, you can clearly state when the item belongs to your customer and you are no longer liable to create claims for reimbursement or replacement. Learn more about shipping as an Etsy seller.
FOB Origin
The FOB origin describes where the item will be shipped from. This also refers to the legal fact that the buyer assumes title of the goods the moment the freight carrier picks up and signs the bill of lading (BOL) at the seller’s pick-up location.
FOB Shipping Point and Destination
The FOB shipping or destination point is where the buyer will receive the item and take over ownership. For example, if your buyer lives in Boise, Idaho, setting your FOB shipping point to this location declares that the seller’s liability ends at the buyer’s address.
Another example, if you’re selling oversized construction equipment at Ritchie Bros. Auction, you could set your FOB location to the auction site. That way, once an auction winner is confirmed, you as a seller no longer have to worry about ownership of your purchase.
In fact, uShip freight delivery services in partnership with Ritchie Bros. allow this process to be streamlined with very little involvement from the seller.
FOB Freight Collect
FOB freight collect is a process stating that the buyer is responsible for all freight charges. The buyer also assumes all risks during transportation including damage to items and replacement/refunds.
FOB Freight Prepaid
In this scenario, the seller takes responsibility for all the costs of freight delivery. The buyer is still responsible for any claims should the item get misplaced or damaged.
More Helpful Shipping Terms and Policies
FOB is the most commonly-used shipping point, but it’s not the only option your business could consider.
FAS (Free Alongside)
Applies if you’re shipping by water. Free Alongside states 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 the other ship’s lifting devices to bring it onboard.
FCA (Free Carrier)
Works well for B2B transactions and allows the seller better control over the delivery. ‘Free Carrier’ 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 ownership of delivery there.
DES (Delivered Ex Ship)
Works well for B2B transactions and allows the seller better control over the delivery. Delivered Ex Ship requires the seller to deliver products to a particular shipping port or destination, where the buyer will take ownership of delivery on arrival.
EXW (Ex Works)
This requires the seller to get products ready to be shipped from its location. The buyer is responsible for making any arrangements for the shipment and for picking up the goods. This policy is more advantageous for the seller.
Leave your Logistics to the Experts
Get Freight Shipping QuotesAuthor
Abby Ruffier
SEO Content Strategist
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