FOB Destination
FOB Destination is the freight term indicating that the
goods will placed free on board at the buyers place of business and the seller
pays the freight costs.
FOB Shipping Point
FOB Shipping Point is the freight term indicating that the
goods will placed free on board the carrier by the seller and the buyer pays
the freight costs.
FOB Shipping Point VS FOB Destination
When terms of sale are FOB (Free on Board) shipping point,
title passes to the buyers with the loading of goods at the point of shipments.
Under these terms, application of the legal rule to a year-end shipment calls
for recognition of a sale and an accompanying decrease in goods on hand in the
books of the seller. Since the title passes at the shipping point, goods in
transit at year-end should be included in the inventory of the buyer despite
the lack of physical possession.
On the other hand, when terms of a sale are FOB destination,
application of the legal test calls for no recognition of the transaction until
goods are received by the buyer. In this case, because of the difficulties
involved in ascertaining whether goods have reached their destination at year
end, the seller may prefer to ignore the legal rule and employ shipment as a
basis for recognizing a sale and the accompanying inventory decrease.
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