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SEVA Technical Services, Inc.

SEVA Technical Services | 757-930-0065 | Service Disabled Veteran Owned Small Business

FOB Origin vs. Destination

Author: 
By Amy Harris - Operational Accounting Manager
Editor: 
Lauren Hall

FOB Origin vs. FOB Destination If you are like I was when first introduced to government contracting, some clarification on FOB Origin and FOB Destination shipping terms when shopping on GSA Advantage would have been helpful. Our customers have questions about this topic all the time so we knew it was the perfect subject to talk about here.

Let’s start with a few definitions: FOB is an acronym for “ Free on Board” or “Freight on Board”. FOB Origin (sometimes called "FOB shipping" or "FOB shipping point") indicates that the sale is considered complete at the seller's shipping dock, and thus the buyer of the goods is responsible for freight costs and liability during transport. FOB (shipping) - Wikipedia https://en.wikipedia.org/wiki/FOB_(shipping) Prepay and Add can be found on your FOB Origin order confirmation. This means the shipper will pay for your freight in advance and add the charges to your final invoice.

FOB Destination means that the buyer takes delivery of goods being shipped to them by a supplier once the goods arrive at the buyer's receiving dock. The seller pays and bears the freight charges and owns the goods while they are in transit. FOB Destination Definition - AccountingTools www.accountingtools.com/fob-destination-definition The easy version: FOB Origin: the buyer (customer) pays the cost of shipping. FOB Destination: the seller (vendor) pays the cost of shipping.

SEVA Technical Services, Inc. currently holds multiple contracts sold through GSA Advantage, both FOB Origin and FOB Destination contracts. This explains why you might incur shipping charges on some of your orders with us, but not all of them. On FOB Origin contracts, GSA Advantage has no system to calculate shipping charges from venders in advance, however there are some indications during your shopping experience that show you the type of contract your merchandise is on, along with a warning when checking out that shipping charges might apply. The notice also states to contact the vendor if you need those charges in advance of placing your order. SEVA’s customer service team is always happy to provide you shipping cost prior to placing your order. You can reach them at 757-930-0065, option # 3, or sales@sevatechnical.com.

Your order confirmation received through GSA Advantage upon check out Is Not your final invoice; your final invoice comes from the seller providing your products. The benefits of purchasing from an FOB Origin contract is that you incur actual shipping charges, a value to both the customer and contractor. On an FOB Destination contract, a cost for shipping has been rolled in to the cost of product without the benefit of specific shipping information such as your quantity, or destination.

The term FOB comes from the maritime shipping world and describes who was liable for damage to goods while in transit by sea: the buyer. When ownership of a shipment transferred from seller to buyer as the goods crossed the ship’s rail, the goods were referred to as “free on board.” If the ship sank, the buyer would be on the hook for an FOB shipment because the buyer had already taken ownership. I hope this information reduces some of the confusion and clarifies these frequently used terms.

 

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FOB/Shipping
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