Free on Board (FOB) is a term used to refer to the transfer of ownership and obligations of goods being shipped. FOB is important as it dictates when risk and title associated with the goods is transferred from the seller to the buyer. This determines who is liable for any damage and loss during the transportation of goods.

To properly leverage FOB terms, there are two terms that are commonly used, FOB Origin and FOB Destination. FOB Origin refers to the buyer taking responsibility for the goods from the point of shipment from the seller. This means that the seller is responsible for getting the goods to the shipping point, but it is the buyer’s responsibility for safely transporting the goods and for any damages incurred during transportation.

Inversely, FOB Destination is an agreement that the seller is responsible for delivering the goods to the stated destination, and is responsible for any damages that may occur to the goods during transportation. In this case, the buyer is responsible for receiving the goods at their destination.

By understanding how and when FOB terms are used, companies can better manage their inventory, shipping, and insurance costs. When a company knows who has the ownership of goods at any given stage of the shipping process, they can ensure that appropriate coverage is put in place to protect their interests.

In addition, FOB terms can also impact customs costs. When a seller indicates that they are shipping FOB Origin, they are saying that the customs costs associated with the product should be incurred by the buyer. From there, the seller will provide the appropriate documentation to the buyer, so that they can work to get the goods through customs in a timely and cost-effective manner.

In conclusion, the use of FOB terms is important for any company that is shipping goods. By understanding when and how FOB terms are used, companies can better manage their inventory, shipping, and insurance costs, as well as reduce their customs costs.