The main difference between FOB and CIF lies in the transference of ownership and liability. It essentially indicates who is liable and responsible for goods if they are damaged, lost or destroyed during shipment. FOB states that the Free On Board is one of the most common incoterms, so it’s expected for business owners to have a firm grasp of what FOB is. FOB shipping essentially indicates who is liable and responsible for goods if they are damaged, lost, or destroyed during shipment. FOB states that the seller should pack the goods and deliver and load them onto the ship fully cleared for export. The cost and risk of the shipment are transferred to the buyer only after the goods are on board safely at a mutually agreed upon shipping port.

How effective products move from the vendor to the customer depends on how well both sides understand free on board . FOB conditions may affect inventory, shipping, and insurance expenses, regardless of whether the transfer of products happens domestically or internationally. The purchased pays the freight costs and is responsible for damages. Should you ship or receive your goods free on board shipping point or destination? The answer often depends on the particular circumstances of your materials transportation.

Free Freightos Tools

Alternatively, the buyer can choose FOB Destination and allow the seller to handle the shipping. Furthermore, relative to other Incoterms available, there are added steps with FOB. Therefore, it might not be suitable for new buyers due to the added responsibilities and increasing risk. Typically, all FOB terms are made clear in the purchase order between the buyer and the seller. Typically, the two other add-on terms are Freight Prepaid and Freight Collect.

FOB Destination means that the ownership of the products transfer from the seller to the buyer only when the goods arrive at the buyer’s location, in good condition. FOB Destination is more beneficial to the buyer, whereas FOB Shipping Point benefits the seller. For example, if a company was shipping its goods to New York City, it would be written out as FOB New York. Purchased merchandise on account from ABC Company for $11,500. We were billed $172.50 for shipping which was added to our invoice.

FOB Price: What is the Difference Between FOB and other sea shipping incoterms?

Under the fob shipping point destination, the seller completes the sale in their records only when the goods arrive at the receiving dock. With the FOB shipping point, the buyer takes the responsibility for lost or damaged goods and freight. Under the FOB destination — it’s the seller’s responsibility. The FOB shipping point is an important term to understand in a contract, as it can significantly affect how much you pay for packing materials and insurance.