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FOB Shipping Point vs FOB Destination

cif and fob

CIF stands for fob shipping point, Insurance and Freight, whereas FOB stands for Free on Board. Both CIF and FOB are agreements used for international shipping when products are transported between a seller and buyer.


Once the shipment is loaded onto a ship at the port of Miami, the buyer becomes responsible for all costs and risks involved in transportation. These loading costs include customs clearance, inland haulage, demurrage if any, origin documentation charges, and origin port handling charges – in this case, the origin port is Miami.

Are rules different when operating under FOB destination?

Sometimes things could get too complicated when handling shipments. In the past years, it was only used for the seafaring category of shipments. However, currently, it can be used for just about any mode of transit shipments. Also, it is important to note that although the word free is used in the FOB shipping, it actually doesn’t negate the shipping cost for the goods in transit. The word is simply used to refer to whoever has the liability and obligation to take care of the shipment in transit. The shipping cost is determine by the cubic feet , volume, distance, weight and other factors. Assume that a seller quoted a price of $900 FOB shipping point and the seller loaded the goods onto a common carrier on December 30.

Is FOB Destination Better for a Buyer?

FOB destination is more favorable for a buyer. The buyer is not responsible for the goods during transit; therefore, the buyer often is not responsible for paying for shipping costs. The buyer is also able to delay ownership until the goods have been delivered to them, allowing them to do an initial inspection prior to physically accepting the goods to note any damages or concerns.

Once a newbie herself, she knows the importance of understanding the basic concepts and learning from best practices when you’re just starting in the world of e-commerce. She holds a degree in Linguistics and her interests span public relations, advertising, sales, marketing, psychology and health. If ‘FOB Destination, freight collect’ is specified, it means that the buyer is the one to pay for the freight. It’s important that you have a clear understanding of FOB shipping so that you know what your rights and obligations are from the start of your contract. If a shipper sends out freight, but that freight never arrives at the customer, the shipper is responsible for either replacing or reimbursing the cost of the goods.

Buyer’s responsibilities

Describe how merchandise purchases flow through both an FOB destination and an FOB shipping point process. Describe how merchandise purchases flow through both an FOB destination and FOB shipping point process. FOB destination, on the other hand, would not have recorded the sale until the package was delivered. A positive cash flow is one of the most important indicators of financial health for any business. It shows whether a company is making more money than it is spending or vice versa. A starting dropshipper should consider the needs of the business and match them to the features affordable accounting software can provide. Ana Misiuro is an editor and content creator with Synder who writes about the intricacies of online marketing and e-commerce.

The shipping costs of the shipment are determined as soon as the buyer takes up the ownership as well as the responsibility of the goods being shipped. And this also impacts the accounting system of that particular company. Therefore, if goods are sent to a FOB shipping point, the sales process gets concluded as soon as the carriers exit the sellers loading dock. This is particularly recorded in the accounting system this way. The two terms have a specific meaning in commercial law and cannot be altered.



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