Handbook of Business Procedures

7.9.3. TRANSFER OF OWNERSHIP - FREE ON BOARD (FOB)

When the university makes a purchase of a good that requires physical delivery, the Free on Board (FOB) terms specify:

• when the title for shipped merchandise passes from the seller to the university.
• who is responsible for the goods while they are in transit.
• who is responsible for filing any freight claims if there is a problem with the shipment.

There are two FOB terms:

1. FOB Destination

The university does not take ownership of the goods until delivery and acceptance of the shipment by the university has occurred. If the goods are damaged in transit, replacement of the items is at the vendor’s expense. The university prefers that all shipments are sent via FOB Destination.

2. FOB Origin (Shipping Point)

The university takes ownership of the goods as soon as the vendor releases the goods to the carrier responsible for delivery. If the goods are damaged in transit, the university is required to pay for the goods in full. The university bears the responsibility of filing any necessary freight claims if loss or damage occurs during transit. The university does not recommend this freight term, especially for the shipment of equipment or delicate items. If a vendor insists on using FOB Origin, the Purchasing Office recommends that the department:

1. request a statement from the vendor indicating the vendor will be responsible for filing any needed freight claims.
2. request that the full value of the goods be declared on shipments with a value greater than $1,000.

Part 7. Purchasing - Table of Contents