SoutheasternAdministrationPurchasingHow to Purchase Responsibly F.O.B. Terms
FOB Terminology – Destination Point
FOB Passage of Title and Risk of Loss Table
Freight Terms establish ownership, and responsibility for transportation cost.
Freight terms generally start with the abbreviation, F.O.B., or Free on Board. This means the goods will be placed in a mode of transport without any loading cost and free of any encumbrances.
F.O.B. is followed by the term Destination or Origin (Shipping Point). Often times, a location may be used such as Hammond, LA, or Buffalo, NY, respectively.
F.O.B. Destination PointorF.O.B. Origin or Shipping Point
Destination — Title or ownership passes to the buyer when the carrier delivers the goods to the delivery point specified by the buyer.
Origin — Title or ownership passes to the buyer at the shipping point when the carrier accepts the goods for transport. The shipping point is usually the vendors factory or warehouse.
Establishing ownership will fix responsibility for the goods and is important in handling claims that may result from accidents occuring before, during or after transport.
After ownership is established, the last section of the freight term establishes payment terms.
Freight Prepaid & Allowed — Vendor pays the freight and buyer will not be billed
Freight Prepaid & Charged — Vendor pays the freight and in turn bills the buyer
Freight Collect — Upon delivery, the buyer is billed by or pays the carrier for freight
F.O.B. Destination, Freight Prepaid & Allowed, is the most desirable freight method serving the best interests of Southeastern.