Transparency is one of the best marketing strategies that work for most ecommerce businesses. If your customers are fully aware of the shipping process, there will be no misunderstanding between sellers and buyers. Also, the best thing about the shipping feature with Strikingly is that you have the option to grant free shipping for every order of at least a certain amount before taxes. For the buyer, there are potential situations where they might be responsible for covering costs before the goods are on board the vessel. For example, if loose cargo is shipped (i.e., not a full container load), goods must go through a Container Freight Station to be consolidated into one container. Typically, sellers won’t cover these costs unless explicitly stated in the sales contract.
The buyer takes responsibility for the remainder of the transport, including the delivery to the destination port. The buyer assumes all risks and benefits of ownership as of the moment the shipment arrives at the shipping dock. Also, under FOB destination conditions, the seller is liable for the merchandise’s transportation costs. In this case, the seller legally owns the products and is responsible until it gets delivered to the buyer’s address.
Definitions of FOB shipping point and FOB destination
Here the title of ownership is only transferred from seller to buyer when the goods have reached the final destination set by the buyer. In a FOB destination agreement, the seller retains ownership of the goods (and is therefore responsible for replacing damaged or lost goods) up until the point where the law firm bookkeeping goods have reached their final destination. It is much easier to determine when title transfers by referring to the agreed upon terms and conditions of the transaction; typically, title passes with risk of loss. The transfer of title may occur at a different time (or event) than the FOB shipping term.
The amount of inventory and cost of goods on the books changes as well, depending on where the goods are and the FOB status. And of course, accepting liability for goods adds to the profits and losses, if there is damage during transit. Understanding the terminology and understanding when you’re accepting liability and ownership, is imperative. Shipping terms are important because of the massive worldwide volume shipped, and the need to have a common understanding of these terms for contracts. The terms affect shipping costs, liability, and even financial statements for accounting. With so many languages spoken, it makes sense to have agreed-upon terms to lessen confusion.
The cost of the goods
Once the products have arrived at the buyer’s location, however, the buyer assumes full legal responsibility for them. A straightforward definition of FOB shipping point is that it releases the seller from any obligation to the package once it gets shipped. It simply means that for a seller who has an overseas buyer, it is in its best interest to have the buyer be responsible for any loss or damage of the package when it gets shipped. 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.
- Knowing the difference between FOB shipping and FOB destination can help you determine whether the shipping charges on your bill of lading are accurate or not.
- Which may mean you’ll need to have a shipping company move the goods by sea or air from the seller’s country to your country.
- Incoterms apply to both international trade and domestic trade, as of the 2010 revision.
- Once the delivery is unloaded in the receiving country, responsibility is transferred to you.
- Transparency is one of the best marketing strategies that work for most ecommerce businesses.
With Synder, you’ll be able to keep track of your shipping amounts and record them into your books flawlessly. The Smart Rules engine may help you to calculate VAT for your sales based on the shipping address country or region. As soon as the goods arrive at the transportation site, and are placed on a delivery vehicle, or at the shipping dock, the buyer is liable for any losses or damage that occur after.
In an FOB destination configuration, the seller holds all of the liability until the product reaches the buyer. This keeps a purchaser’s inventory costs low while also imparting far less risk on part of the buyer. An FOB shipping point is a catch-all term for a contractual obligation that identifies the person who must bear the liability of a shipment. In an FOB origin arrangement, a purchaser pays for shipping from the factory to the shipment point. You are definitely giving your customers a clearly indicated information on how you charge for shipping and on how they can get the items shipped.