Meaning of Freight Terms Specified in the Uniform Commercial Code (UCC

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Meaning of Freight Terms Specified in the Uniform Commercial Code (UCC)

February 24th, 2012 Tags:freight termsPurchasingUniform Commercial Code (UCC)

Robert Menard, Certified Purchasing Professional, Certified Professional Purchasing Consultant

Freight, transportation, ownership, and risk of loss are not very well understood concepts in the purchasing community. Indeed, many buyers confuse receipt with delivery.  Lets examine the most commonly used freight terms for delivery of good within the bounds of US trade and associated risk of loss.

First, understand that, delivery according to the UCC, is an intangible concept.  Delivery occurs when and where the seller voluntarily transfers effective ownership of goods to the buyer.  Once delivered, the rights of ownership and risk of loss rests with the buyer.  This is different from receipt which occurs when buyer takes physical possession of the goods.

It is in the buyers interest to carefully negotiate freight terms as the UCC favors the seller when terms are not specified.  The most common terms are:

Free on Board (FOB) place of shipment or

Free on Board (FOB) place of destination or

Free on Board (FOB) vessel, car, or other vehicle

Free Along Side (FAS) vessel (watercraft)

There are many variations in use.  To clarify, this Table shows the meaning and impact of the most popular freight terms.  It identifies who pays for the freight and where/when Delivery and risk of loss takes place.

For those engaged in foreign trade, seeINCOterms

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