Purchasing Services -- Freight Terms
Purchasing Services -- Freight Terms |
 | FOB literally 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. In the table shown below, the first entry is the most beneficial for the University, while the others increase the expense and risk to the University. Keep in mind that when ownership passes to Wash U at the point of origin, we own the merchandise in transit. Thus, 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. Purchasing Services normally recommends that purchase orders and quotations spell out “FOB: Destination; Freight Prepaid.” However, there may be times when accepting a lower bid requires that we pay the shipping costs and accept the risk of loss for merchandise in transit. The following table summarizes commonly used shipping terms and their implications: NOTE: you will sometimes see the term "Freight Allowed" which means the seller pays the freight bill, and absorbs the costs.
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