Answer to Question 1
Free-on-board (FOB) terms of sale specify when the ownership and title of the goods pass from a seller to a buyer in a domestic transaction. Wise selection of FOB terms determines control over mode and carrier selection, transportation rate negotiation, and other key decisions. Another important aspect of terms of sale is the determination of in-transit freight accountability.
FOB terms determine where the buyer's responsibilities begin and where the seller's responsibilities end. If the terms are FOB origin, title (ownership) to the goods changes hands at the originusually the shipping point or seller's distribution center loading dock. From that point on, the goods belong to the buyer, and any loss or damage is the responsibility of the buyer. If the terms are FOB destination, the title transfers at the destinationtypicall y the buyer's unloading dock. The seller has total responsibility for the goods until they are delivered to the buyer.
A related issue is the responsibility for carrier payment. In general the seller pays the carrier for the transportation service cost under FOB destination terms, while the buyer pays the carrier under FOB origin terms. However, exceptions to these guidelines do occur. The option for Freight Prepaid or Freight Collect should be specified with the FOB terms. In cases where the seller has more clout with carriers, it is wise to have the seller negotiate transportation rates under the Freight Prepaid option. Freight Collect is typically used when the buyer has more power with carriers.
Answer to Question 2
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