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FOB Shipping Point Definition
FOB is an abbreviation or initialism commonly assumed to mean "Freight On Board" or "Free on Board" and is written as "F.O.B" or "f.o.b." while alternative abbreviations "FOB" or "fob" are used by some industries.
In general legal terms for shipments wholly within the United States, FOB generally means the product is tendered to the carrier free of any encumbrances which would restrict the passage of title. However, FOB as a stand alone identifier is not adequate in the commercial setting as the exact point of title transfer and responsibility for payment of shipping charges and filing damage claims has not been identified.
Commonly assumed to mean is not a good way to start the legal definition of any word and failing to settle the issues of title transfer, payment of charges and damage claims does not improve the situation.
Because the accepted definition of FOB is lacking and the usage is subject to many interpretations, the Uniform Commercial Code (UCC) has ceased to define FOB with a legal definition. Instead the States are free to perform their own definition but the States often refer back to the UCC which in turn makes the definition of FOB one very classic Catch-22 situation.
For ease of usage on this website as well as written quotes provided to the customer, Dogwood Ceramic Supply will often refer to shipments as FOB Dogwood, or FOB Shipping Point (manufacturer's warehouse) for those few items that do not routinely ship from our warehouse or for kilns shipped to the West Coast that may ship from the Paragon factory in Dallas Texas. In general terms (because legal most likely does not apply unless it does and then maybe it doesn't and we are not lawyers so what we write is not binding even to ourselves unless it does), we mean the products are F.O.B. Origin, Freight Prepaid and Added.
In this form of usage the title (ownership) of the
goods is transferred at the time the goods are tendered to the freight company (shipping
point, i.e. placed on the freight truck). Payment of the freight charges are due (from the
shipper) at the time the goods are tendered to the freight company. Ultimately the freight charges will be
paid by the shipper and subsequently added to the customer's invoice.
The issue of title is important with regards to any damage claims:
For Dogwood Ceramic Supply, since some goods are accepted by
a freight company and other goods are accepted by the customer or their agent at
our warehouse door,
we need a simple system that defines the point of title transfer. In this
regard we define the point of title transfer as when the goods depart our
building for all sales. For goods shipped from our building this makes
sense as the Bill of Lading (the acceptance document) states the Freight Company has received the shipment in good condition and is responsible
for any damage that occurs with the shipment until the goods are delivered to the owner (consignee).
The idea of title transferring at the time of departure from our building is
further reinforced by the fact that the consignee may (while incurring charges)
request the goods be delayed in delivery, diverted from the location designated
by the shipper or incur additional accessorial services.... obviously if the
consignee can enact these changes the consignee must have some legal control
over the goods. Of course if the
customer or their agent has accepted the goods directly from our building
without the use of a freight carrier the legal
concept of title transfer is well established.
When the goods are delivered to the consignee
(owner), the Bill of Lading will be presented to the owner for signature of acceptance of the shipment in good condition. Any damages or shortages
noted on the Bill of Lading will, as as a matter of law, obligate the the freight company for those damages or shortages. As ownership has been
transferred and the damaged (or shorted) goods are retained by the owner, the claim against the freight company is to be filed by the owner (consignee).
Filing freight damage claims in this manner are much cleaner
and easier to perform. Unless the goods were damaged beyond repair or
recognition and returned to the shipper, the Consignee (customer receiving the
freight) has properly documented the damage on the Bill of Lading AND still
retains possession of the damaged goods. As the Consignee still retains
the damaged goods (and can allow further inspection of the goods by the freight
carrier should the need arise) the damage claim should logically be filed by the Consignee.
There are also criminal issues that could arise from filing a false damage claim
and as such a prudent man would be well advised to only file a claim should
he/she be in possession of the goods purportedly damaged.
As a side note, a customer purchasing goods from our store and is involved in an auto accident would be still in possession of the goods and file the damage claim against the responsible party (insurance company or driver who cause said accident). Others (meaning the seller of the goods) can not file any claim against the parties in the said accident because they are not a party to the event or in possession of the goods.
Obviously if the goods are damaged during shipping and returned to the shipper it is illogical to assume the consignee (who does not have possession of the goods) would file the freight damage claim and therefore the claim would be filed by the party (shipper, i.e. Dogwood Ceramic Supply) with the goods in their possession.... which also means the title transferred by the shipper to the customer has now reverted back to the shipper.
It is for such complex reasons the UCC has ceased to define FOB because the simple definition can not address all the particular issues of title transfer, payment of charges and damage claims.
Additional FOB Notes:
While the transfer of title and safe shipping of products is a serious issue. We offer this discussion simply to demonstrate the near impossibility of utilizing a simple abbreviation to define the task of transferring the title to the products we sell. Please note the opinions of Dogwood Ceramic Supply are our own and may not be supported by the decisions of the laws of the United States or the actions of any State or Federal court.
No attempt is being made to define the FOB relative to export shipments made by Dogwood Ceramic Supply either by package carrier such as UPS or a freight shipment simply because there are substantial differences between domestic and international law.
One Last Note:
FOB issues and questions concerning title transfer typically arise from damage issues.
The issue of title transfer is not very significant to some of the heavy products we sell such as moist clay. Clay is pretty indestructible and in most cases either the product arrives intact at the final destination or it never arrives. If lost during shipping the product is simply reshipped to the customer and the claim for damages settled between the carrier and the shipper as there is proof of the title NOT being transferred from carrier to consignee.
Other products, such as a pallet as slip, glaze or unglazed tile are a bit more complex. If these items incur minor damage during shipping is most likely a puncture wound that is easily found and noted on the delivery receipt. A single carton or box out of 50 or 100 or more cartons or boxes on the pallet may be lost because of the damage but the remaining units are fully functional. It should a minor claim to quickly settle with the freight company and best handled by the party with the possession of the goods.
The only complex items for our business are kilns, pottery wheels and other high value equipment items where there is only one item per shipping unit. With a little care to inspect incoming goods for damaged crating or packaging materials the issue of damages is minimized. In the event of massive damage, the best action is to simply refuse the goods..... allowing the goods to be returned to the seller and the claim process easily handled by the party in receipt of the goods. Again, title would be transferred back to the shipper along with the goods.
Overall, Dogwood Ceramic Supply's damage rate is surprisingly small because we take pretty darn good care in preparing our goods for shipping. In fact most of the claims arise not from major or minor damage but from lost goods. And since the goods never arrive at their destination the issue of title transfer is a non-issue..... Dogwood simply reships the goods and files the claim because the open delivery receipt is sufficient proof the goods (and title) never arrive to their destination.
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12590 Dedeaux Road
Gulfport Mississippi, 39503
Telephone (228) 831-4848 Fax (228) 831-3111
Showroom Business Hours:
Monday, Tuesday, Friday and Saturday 10AM to 5PM
Thursday 1PM to 6PM
Closed Wednesday and Sunday
FOB generally means the product is tendered to the carrier free of any encumbrances which would restrict the passage of title. However, FOB as a stand alone identifier is not adequate in the commercial setting