Purchasing Department

What you need to know about Freight!

Freight Terms

Purchasing decisions involve shipping decisions. Two important questions are:

  1. Who pays the freight cost?
  2. Who owns the merchandise in transit?:

FOB means "Free On Board" It is the place at which ownership (title) of the goods passes to the buyer, and usually, but not always, the point at which the buyer is responsible for shipping costs. The FOB term alone is often confused with the question of who pays the actual freight charge. These are actually two separate issues and should be clearly defined when dealing with a supplier.

  • "FOB Destination, Freight Prepaid" is the most beneficial freight term for the University, while the others increase the expense and risk to the University.
  • Keep in mind that when ownership passes to the University at the point of origin, UA owns the merchandise in transit. We would be obligated to pay for lost or damaged shipments and then file a claim with the carrier, which could require several months to be resolved.

Terms of Sale

Payment of Initial Freight Charge

Bears final Freight Cost

Owns Goods in Transit

Files Claims, (if any)

FOB Destination, Freight Prepaid & Allowed

Seller

Seller

Seller

Seller

FOB Destination Freight Collect

None

Buyer

Seller

Seller

FOB Destination, Freight Prepaid & Added

Seller

Buyer

Seller

Seller

FOB Shipping Point, Freight Prepaid & Allowed

Seller

Seller

Buyer

Buyer

FOB Shipping Point, Freight Collect

None

Buyer

Buyer

Buyer

FOB Shipping Point, Freight Prepaid & Added

Seller

Buyer

Buyer

Buyer