Question

3) Which FOB method would you recommend - what would influence your decision? (would you use the accounting answer - it depends?) in 200 words

Answer 1

In international commercial law FOB, "Free On Board", is a term specifying at what point respective costs, obligations, and risk involved in the goods delivery, a shift from the seller to the purchaser. I will recommend FOB shipping method. FOB Shipping Point, shows that the sale occurred at the shipping point, which means at the shipping dock of the seller. When the sale occurs at the shipping point (seller's shipping dock), then the buyer must takes responsibility for the cost of transporting the products. (The purchaser will record this cost as Transportation-In or Freight-In). Thus, under FOB shipping point terms, the buyer holds the responsibility for the shipping cost of the product to its facility.

In my opinion, when the buyer's transportation department is proactive, it should avoid FOB destination terms, and must favor FOB shipping point terms to ensure that it can better control the process of logistics. It will also minimizing overall costs of import and increase the convenience. When shipping FOB, it has a complete control over the cost of freight. It also provide the benefit of hiring the own forwarder at an agreed rate of freight, among other expenditure. It provides exact and timely information from the forwarder, thus solving any service hassles or issues during transit. It also gives transparency on shipping movements, as have local contact to give shipping information, quoted costs for both freight as well as locals.