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FOB is a shipping process where the seller arranges for the goods to be shipped on a vessel approved by the buyer, and the seller’s obligation is fulfilled when the order is removed from the ship’s hold and deposited on the quay. The seller is responsible for any damage up to the goods crossing the ship’s rail, and the buyer assumes responsibility from that point. The exact application may vary by country, so buyers should understand the details of the shipment.
Free on board is a term used to describe a specific process for shipping goods. Sometimes called freight on board or simply FOB, the process involves shipping the customer’s order via a vessel requested by the buyer. The seller’s obligation is considered fulfilled when the order is removed from the ship’s hold and deposited on the quay.
Free use of onboard transportation is in common use around the world. In real practice, FOB helps to establish the exact point in the delivery process when the seller relinquishes responsibility for the goods and the buyer assumes that responsibility. In this type of shipping situation, the seller is responsible for any damage that occurs on the order up to the time the goods cross the ship’s rail. From that point forward, the seller is responsible for the condition of the goods.
For example, if the goods are shipped free of charge on board, the seller will arrange for the goods to be shipped on a vessel that meets the buyer’s approval. The seller handles all the details involved in delivering the goods to the dock and loading the goods into the ship’s hold. At the point of destination, the seller also organizes the removal of the goods from the hold and deposit on the dock. After the goods leave the vessel, the buyer must make arrangements to remove them from the dock and transport them to the buyer’s place of business, a process known as customer arranged pickup.
In the event that the goods are damaged while still on board the ship, the seller is responsible for replacing them or refunding any payments received on the order up to that time. If the goods are damaged when landing on the pier and awaiting collection by the buyer, the seller is not liable. Once the goods leave the vessel used to transport the order, the seller is no longer responsible for the condition of any of the items included in the order.
It is important to note that the exact application of free onboard transportation may vary slightly from country to country. For this reason, buyers should always understand what the seller means by offering the free on board option. By getting detailed information on how the shipment will be handled and at what point the seller must take responsibility for the shipped goods, the chances of a miscommunication between buyer and seller are greatly minimized.
Asset Smart.
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