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Key takeaways
- FOB destination is a US domestic shipping term under which title and risk pass to the buyer when the goods arrive at the buyer's location.
- The seller owns the goods in transit and files the claim if they are lost or damaged.
- The seller records revenue on delivery, and the buyer records inventory only on arrival.
- Freight payment is a separate term. FOB destination, freight prepaid is the cleanest combination for the buyer.
Free PDF and Excel: FOB destination delivery checklist. Get it below
What FOB destination means
FOB destination is a shipping term under which the seller keeps title and risk of loss until the goods reach the buyer's named location, and the buyer takes over on arrival.
A buyer asks for it when it does not want to manage transit insurance or damage claims, or when it wants goods to stay off its books until they are physically in the warehouse. A seller accepts it when the lane is reliable and the price covers the extra risk.
A restaurant group buys 60 cases of olive oil from a distributor on FOB destination terms. The delivery truck is hit by a flood on the way and the cases are spoiled.
The distributor owns the loss and either ships replacements or credits the group. The restaurant group never booked the order, so its inventory and payables are untouched.
Where it differs from FOB shipping point
| Point | FOB destination | FOB shipping point |
|---|---|---|
| Risk passes | On arrival | At shipment |
| Goods in transit belong to | Seller | Buyer |
| Insurance in transit | Seller | Buyer |
| Buyer records inventory | On arrival | On shipment |
| Seller records revenue | On delivery | On shipment |
Free PDF and Excel
FOB destination delivery checklist
A checklist for buyers and sellers working on FOB destination terms, with an arrival and damage report form.
- Delivery responsibilities table
- Arrival inspection checklist
- Damage report layout
- Excel arrival log
What to nail down
- The named destination: a warehouse dock, not a city.
- What counts as arrival: unloaded, signed for, or just on site.
- Inspection: how long the buyer has to report damage after arrival.
- Freight terms, stated separately.
- Evidence of delivery, such as a signed proof of delivery or delivery note.
Accounting effect for the buyer
- No inventory and no payable until the goods arrive.
- Month-end cut-off is easier: only count what has reached the dock.
- Freight paid by the buyer on freight collect still becomes part of inventory cost.
- Disputes over damaged goods go back to the seller on its own insurance.
- Named destination is a full address.
- Arrival is defined in the contract.
- Inspection period is stated.
- Freight terms are separate and clear.
- Proof of delivery is part of the process.
- Seller carries insurance for the whole trip.
Last checked: 19 October 2026. General United States commercial practice. The contract and governing law decide who bears loss in a given case.
Frequently asked questions
What does FOB destination mean?
The seller keeps ownership and risk of loss until the goods are delivered to the buyer's named location.
Who pays for damaged goods under FOB destination?
The seller, because it owns the goods in transit. The buyer reports damage on arrival.
Who pays freight under FOB destination?
Freight terms are agreed separately. Prepaid is common because the seller controls the shipment.
When does the seller record the sale?
On delivery to the buyer under the usual rule for this term.
Is FOB destination better for the buyer?
Usually yes for risk and cut-off, but sellers often price the risk into the unit cost.