Freight Terms

Standard freight terms need to be clearly understood when transporting freight from seller to buyer.  The two main questions involved are:  #1)  Who pays the freight charges ? and #2)  Who owns the goods in transit ? 


The term FOB means “Freight on Board.”  It is the place in which ownership of goods passes from buyer to seller.  The table below summarizes terms, applications, and can be used as a reference guide in understanding freight terms and responsibilities.


FOB Point
Shipping Condition
Payment of
Freight Charges
Bears Freight
Charges
Owns Goods
in Transit
Files Claims
(if any)
Explanation
FOB shipping point (origin) COLLECT Buyer Buyer Buyer Buyer
Title and control of goods passes to
buyer when carrier signs for goods
at shipping point (origin)
FOB shipping point (origin) PREPAID Seller Seller Buyer Buyer
FOB shipping point (origin) PREPAY and ADD Seller Buyer Buyer Buyer
Seller pays freight charges and adds
to invoice. Title and control of goods
passes to buyer when carrier signs
for goods at shipping point (origin)
FOB destination COLLECT Buyer Buyer Seller Seller
Title remains with seller until goods
are delivered
FOB destination PREPAID Seller Seller Seller Seller
FOB destination PREPAY and ADD Seller Buyer Seller Seller
Seller pays freight charges and adds
to invoices. Title remains with seller until goods are delivered