Purchasing decisions involve shipping decisions. Two important questions are:
- Who pays the freight cost?
- Who owns the merchandise in transit?:
FOB means “Free On Board” It is the place at which ownership (title) of the goods passes to the buyer, and usually, but not always, the point at which the buyer is responsible for shipping costs. The FOB term alone is often confused with the question of who pays the actual freight charge. These are actually two separate issues and should be clearly defined when dealing with a supplier.
- “FOB Destination, Freight Prepaid” is the most beneficial freight term for the University, while the others increase the expense and risk to the University.
- Keep in mind that when ownership passes to the University at the point of origin, UA owns the merchandise in transit. We would be obligated to pay for lost or damaged shipments and then file a claim with the carrier, which could require several months to be resolved.
|Terms of Sale||Payment of Initial Freight Charge||Bears Final Freight Cost||Owns Goods in Transit||Files Claims (if any)|
|FOB Destination, Freight Prepaid & Allowed||Seller||Seller||Seller||Seller|
|FOB Destination, Freight Collect||None||Buyer||Seller||Seller|
|FOB Destination, Freight Prepaid & Added||Seller||Seller||Buyer||Buyer|
|FOB Shipping Point, Freight Collect||None||Buyer||Buyer||Buyer|
|FOB Shipping Point, Freight Prepaid & Added||Seller||Buyer||Buyer||Buyer|