FOB Shipping Point vs FOB Destination: What’s the Difference?

fob shipping point

As a small business owner, you want to make your own decisions, and with fob shipping point, it’s a matter of finding the right balance between reward and risk. Delivered Duty Paid places the maximum responsibility on the seller’s side. Under DDP, the seller is responsible for arranging the shipment to the destination port, paying charges at the destination port, and loading goods onto the truck there. FOB is advantageous for the buyer because it provides more flexibility and control over the logistics and shipping costs as they can choose their own shipping methods. Additionally, FOB lowers the buyer’s dependence on the seller if something goes wrong during the delivery as they have direct contact with the logistics company. Fob Destination, Freight Collect – The buyer pays all freight charges but does not take responsibility until the cargo gets to the destination port.

Who pays shipping for FCA?

Who pays freight with an FCA incoterm agreement? Under the Free Carrier, or FCA Incoterm, the buyer is responsible for all freight costs.

International commercial laws have been in place for decades and were established to standardize the rules and regulations surrounding the shipment and transportation of goods. Having special contracts in place has been important because international trade can be complicated and because trade laws differ between countries. An FOB, or free on board, shipping point, is a record that explains where merchandise for a shipment is going and when it was shipped. The configuration of an FOB shipping point contractually binds the buyer and the shippers unde the same liability once shipped. Since the package was shipped using shipping point, the title of the goods transferred when GM placed the package on the loading dock.

FOB Destination

Traditionally, the ownership transfer is defined in the contract of sale and bill of lading. Working with a 3rd party logistics provider like ShipCalm allows businesses to simplify the process of understanding incoterms.

fob shipping point

FreightWaves Ratings reference a list of approved sources for use of research to support editorial research and drafting. As a result, you will be able to expand your business with confidence. To find out more about other import and export terminology, check out FreightWaves Ratings so that you can stay as informed as possible. To calculate your FOB price, you’ll need to know your ex-factory price plus other costs. As vague as that sounds, it is rather simple, but the other costs can quickly add up.

Transfer of Ownership

Explain the significance of international transfer pricing for a company. Identify and explain five theoretical concepts, assumptions, and/or constraints within an accrual basis of accounting (i.e. matching concept).

  • Free on Board is an Incoterm that evenly splits the responsibilities between buyers and sellers.
  • With shipping being the final step in completing a sale, it is often the last thing thought about by both buyers and sellers.
  • This allows them to rely upon one single company for the whole of the delivery process and mitigates any potential miscommunications between separate shipping companies.
  • Conversely, a buyer who is shopping from an online store with an address located out of the country would want to have an FOB destination rather than FOB shipping point.
  • Select a well-known company and explain two ways that computerized accounting helps this business to be successful from an e-commerce standpoint.
  • Shipping is one of the most integral parts of a business’ supply chain fulfillment.

Contact Shipware for more details on how we can help save you money with our parcel audit software and other solutions for logistics optimization. Company A buys watches from Vietnam and signs a FOB Newark agreement.