Get to know the vital terms of Logistics and Supply Chain Management.
FOB origin is known as “Free On Board Origin.” It is an incoterm wherein the goods ownership time will be when the buyer should assume the carrier charges. This form of arrangement implies that responsibility regarding shipping charges occurs once the goods are handed over to the carrier at the seller’s place.
Transfer of Title: When the goods are delivered to the carrier and they leave the seller’s place, the ownership in respect of those goods is transferred to the buyer.
Risk of Loss: All risks in respect of transportation shall be transferred to the buyer from the time the goods leave the seller’s place of business or another place as indicated by the parties at the beginning of this contract.
Seller’s Role: In FOB origin, the seller only complies with the obligation of making the goods available at his place. Once he hands over the goods to the carrier, then the interest of the seller ends in that shipment.
Cost Control: The cost and arrangements of shipment are better controlled by the buyer because he has to arrange logistics for transporting the goods from the seller’s place to their destination.
Transparency: The buyer is well aware of when responsibility for the goods begins and will be able to manage risk and make plans regarding insurance, if necessary.
In FOB origin, responsibilities for transportation and its risks lie in the hands of the buyer as soon as the goods are turned over to the carrier. The shipping arrangement is transparent and has control over shipping logistics. However, the risks associated with the shipment also get transferred to the buyer.
