There is always a problem of miscommunication because the buyer is in touch with people who act on behalf of the seller. In this case, the seller determines the rules and chooses a freight forwarder, which can end up charging more to the buyer, all for the sake of better profit. Although these two are similar, CIF is often considered a more expensive option. They both specify who is in charge and where this process starts and ends. CIF and FOB do share some similarities: both are shipping agreements that hold information about freight origin and destination. Īnother option that is often used for international shipping agreements is also CIF (Cost, Insurance and Freight).
Freight prepaid and charged back: In cases where the documentation states FOB Origin, the shipper will not pay for the cost of shipping, but instead adds the freight cost to the existing invoice and the receiver pays for shipping by paying the more expensive bill.Freight collect and allowed– In cases where FOB Destination is indicated in the documentation, freight collect and allowed means that the shipper takes partial responsibility, but the receiver deducts the freight charges from the shipper.Conversely, in cases where the documentation states Freight Origin, Freight Collected implies that the receiver bears all of the responsibility
To understand this process better, we will explain each of these two parts, and establish who is responsible for each of the stages of shipping. These terms need to be properly established in the documentation. FOB origin places the cost on receivers, and FOB destination places the cost on the sellers. FOB determines where the responsibility of one party finishes and the other begins. The FOB process includes two sides, often referred to as the origin and destination. When it comes to domestic operations, there are three important documents to consider: the bill of lading, the freight bill, and FOB terms. FOB has become one of the most-used commercial terms when it comes to shipping contracts. Yet, sometimes understanding all the terms and conditions of both international and domestic shipments can become confusing. Today, supply chains stretch across the globe, and boundaries between distant markets only continue to expand. It refers to the set of Incoterms (International commerce terms, established in 1936) that governs all the details regarding ownership and payments for shipments transferred overseas. It pertains to where and when ownership is transferred from the seller to the buyer.
Meaning of freight free#
Put simply, FOB (Freight on Board or Free on Board) is a shipping term that determines who oversees paying transportation costs. Understanding these terms is especially important for eCommerce business owners that are just getting started with the process of taking their business globally and are trying to determine the most effective solution for their clients. You have probably heard these terms floating around in the sea of freight management abbreviations but weren’t clear about their exact meaning. Today we will explain the importance and meaning of FOB in shipping, as well as the differences between FOB and CIF. Defining the meaning of Freight on Board or Free on Board: Understanding the differences between the FOB and CIF and which option is better for your business
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