Explain the difference between FOB origin and FOB destination.

Explain the difference between FOB origin and FOB destination.

• A. FOB origin transfers title and risk to the buyer at shipment; FOB destination transfers at delivery to the buyer's location.
• B. FOB origin means ownership transfers at delivery; FOB destination transfers at shipment.
• C. Both transfer title at shipment.
• D. Both transfer risk to buyer on completion of delivery.

Answer: (C)

FOB terms are about who bears risk and responsibility, not who technically owns the goods. The key difference is when risk passes from seller to buyer. Under FOB origin, the seller’s obligation is considered fulfilled once the goods pass the ship’s rail at the port of shipment. From that moment, the buyer bears the risk of loss or damage while the goods are in transit, even though the seller may have already loaded and handed them over to the carrier. The buyer typically pays for and arranges shipping from that point onward. Under FOB destination, the seller keeps the risk until the goods are delivered to the named destination and handed to the buyer. The buyer’s risk starts only when delivery occurs. Title (ownership) is not defined by FOB terms; it is determined by the sale contract. In practice, title may pass at shipment or at delivery, depending on what the contract specifies, but FOB itself does not fix the transfer of ownership.

FOB terms are about who bears risk and responsibility, not who technically owns the goods. The key difference is when risk passes from seller to buyer.

Under FOB origin, the seller’s obligation is considered fulfilled once the goods pass the ship’s rail at the port of shipment. From that moment, the buyer bears the risk of loss or damage while the goods are in transit, even though the seller may have already loaded and handed them over to the carrier. The buyer typically pays for and arranges shipping from that point onward.

Under FOB destination, the seller keeps the risk until the goods are delivered to the named destination and handed to the buyer. The buyer’s risk starts only when delivery occurs.

Title (ownership) is not defined by FOB terms; it is determined by the sale contract. In practice, title may pass at shipment or at delivery, depending on what the contract specifies, but FOB itself does not fix the transfer of ownership.