The freight forwarding process involves a significant number of risks for the goods. Whenever you ship your goods to a different destination, either the seller or buyer has to face the responsibility of risks. FOB is among the top incoterms used in the shipping industry that every shipper must understand before partnering with a service. Under this, it states whether the responsibility of the risk burden is on the buyer or seller. In short, we can say it is a document stating who will bear the responsibility for the risks during different shipping stages. Let us give you a detailed description of this incoterm:
Free-On-Board (FOB) is an incoterm that indicates who will be the bearer of the responsibility of the goods between the seller and buyer and when it will be transferred. During international shipment, it means that the seller is responsible for transporting goods to the port until the loading process.
Afterward, the responsibility is transferred to the buyer for the ocean freight, unloading, insurance and transportation from the initial point to the endpoint. Under FOB, several other terms are also used that you must understand. So, let us first know about them:
Different FOB Shipping Terms Used in the Shipping Industry:
FOB Shipping Point
The free-on-board shipping point transfers the total responsibility from the seller to the buyer when the goods are loaded into the delivery carrier. Such as, in Ocean Shipping, the seller is only responsible till the goods are loaded to the delivery goods. Afterward, the buyer has to bear all the losses or damage made to the goods until the goods reach the final destination.
FOB Shipping Point Cost
Under this, the seller has to bear all the responsibility of the transport costs and fees until the goods reach the actual shipping port of origin. From there on, the buyer will be responsible for all the costs associated with the transport, taxes, customs duties, and other charges. Here the buyer’s responsibility begins when the goods reach the destination port of origin.
Among the several terms used in free-on-board delivery, the FOB destination offers several advantages to buyers. Here the responsibility of the goods begins for a buyer when it gets delivered to the final destination. The buyer’s responsibility begins at the moment when it reaches the final destination. Until then, the seller has to bear all the risks associated with the journey.
FOB Destination Cost
In FOB destination cost, the seller needs to bear all the costs, including transportation fees, port fees, other expenses, and the risks associated with goods during the journey. As soon as the goods reach the final destination, the responsibility for the costs is transferred to the buyer.
How does FOB help Divide the Risk Burden?
There are so many risks associated with the shipping process that buyers and sellers need to understand. When you decide to buy goods in bulk, you need to be aware of the several ways to transfer the risk burden to the shippers. When you sign an FOB contract with your seller, you will get the advantage of moving the risk burden on the sellers. This way, you can pick up your goods safely when it reaches the final destination without paying for the damages to the freight during the journey.
How Can a 3PL Service Make the Process Easier?
When shipping your goods for the first time, you might face many hurdles during the journey. There are several incoterms used in the shipping industry that you must know as a beginner for the safety of your goods. The above blog has clearly stated everything related to FOB and the related terms that can impact your good’s journey. However, 3PL services providers like SLR shipping services help you get your goods delivered using their expertise in the field and bring down the risk rate.