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Key takeaways
- FOB shipping point is a United States domestic shipping term. Title and risk of loss pass to the buyer when the seller delivers the goods to the carrier.
- The buyer is the owner while goods are in transit, so it records inventory and carries the claim if goods are damaged.
- Who pays freight is a separate agreement: prepaid, collect, or prepaid and add.
- It is not the same as Incoterms FOB, which applies to sea and inland waterway only.
Free PDF and Excel: FOB shipping point checklist and cut-off worksheet. Get it below
What FOB shipping point means
FOB shipping point, also called FOB origin, is a shipping term under which ownership and risk of loss pass from seller to buyer as soon as the seller delivers the goods to the carrier at the point of shipment.
FOB stands for free on board. In United States commercial practice it describes where title and risk transfer, and it is a different tool from the Incoterms published by the ICC. A seller uses FOB shipping point because it wants the transit risk gone the moment the goods leave. A buyer should expect to carry insurance from that moment.
A Chicago distributor buys 300 pallets of beverages from an Ohio bottler on FOB shipping point, freight collect. The truck leaves on the 29th. A road accident on the 30th destroys 40 pallets.
The bottler has no claim to bear. The distributor owns the goods and files the claim with the carrier or its insurer. In its books the distributor counted the inventory in transit at month end.
FOB shipping point and FOB destination
| Point | FOB shipping point | FOB destination |
|---|---|---|
| Title and risk pass when | Goods handed to the carrier | Goods reach the buyer |
| Who owns goods in transit | Buyer | Seller |
| Who files a transit damage claim | Buyer | Seller |
| Who records inventory in transit | Buyer | Seller |
| Sale recorded by the seller | On shipment | On delivery |
Free PDF and Excel
FOB shipping point checklist and cut-off worksheet
A checklist for buyers who accept FOB shipping point and a month-end worksheet for goods in transit.
- Who owns what table
- Insurance and claims checklist
- Month-end cut-off worksheet
- Excel in-transit register
Freight is a separate decision
- Freight prepaid: the seller pays the carrier and does not add it to the invoice.
- Freight collect: the buyer pays the carrier on delivery.
- Prepaid and add: the seller pays the carrier and adds the cost to the invoice.
Many people read FOB and freight as one thing. They are two. A contract can say FOB shipping point, freight prepaid and add, and mean that title passes at the dock while the buyer ends up paying the freight anyway. Write both.
Accounting effect
- The buyer books inventory and a payable when the goods are handed to the carrier, even though they have not arrived.
- Month-end cut-off matters. Goods shipped on the 30th but received on the 3rd are in the buyer's inventory at month end.
- Freight paid by the buyer is part of inventory cost.
- The seller records revenue on shipment.
- Insurance covers transit from the shipping point.
- Freight terms are stated apart from FOB.
- Month-end cut-off procedure includes goods in transit.
- Claims procedure for damage is known.
- Named shipping point is stated.
- Carrier selection rights are agreed.
For international sales, move to an Incoterm such as FCA, CPT or DDP. Our trade terms guide shows how the families differ.
Last checked: 19 October 2026. General United States commercial practice. Governing law and contract wording decide the result in any dispute. Ask your counsel.
Frequently asked questions
What does FOB shipping point mean?
The buyer takes ownership and the risk of loss as soon as the seller hands the goods to the carrier at the point of shipment.
Who pays freight on FOB shipping point?
It depends on the freight terms agreed separately. Often the buyer pays, but the seller may prepay and add the cost to the invoice.
Is FOB shipping point the same as FOB origin?
Yes, the two names describe the same arrangement.
Who files the claim for goods damaged in transit?
The buyer, because it owns the goods in transit.
Is FOB an Incoterm?
Incoterms 2020 includes FOB for sea and inland waterway transport. The FOB shipping point and FOB destination terms are US domestic practice.