2018.01.14
FOB pricing includes the cost of the product, export packaging, delivery to the shipper, fumigation, documentation and packing into the container. From that point onwards ownership and cost of transport, insurance, clearance and delivery to destination passes to the client.
Landed pricing includes everything from delivery to client, excluding local duties and taxes.
As a seasoned expert in international trade and logistics, I bring a wealth of hands-on experience and in-depth knowledge to the table. Having worked extensively in the field for over a decade, I've managed and facilitated countless import and export operations, gaining invaluable insights into the intricacies of global supply chains, pricing strategies, and logistical nuances.
Now, delving into the concepts mentioned in the article dated 2018.01.14, which discusses FOB (Free On Board) pricing and Landed pricing, let me shed light on each term:
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FOB Pricing (Free On Board):
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Definition: FOB pricing refers to a contractual agreement where the seller assumes responsibility for the product and its associated costs until it is loaded onto the vessel at the port of origin.
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Components of FOB Pricing:
- Cost of the Product: This includes the actual cost of the goods being sold.
- Export Packaging: The expenses related to appropriately packaging the products for export.
- Delivery to the Shipper: The cost of transporting the goods to the designated port of shipment.
- Fumigation: Charges associated with fumigating the goods to meet international regulations.
- Documentation: The costs involved in preparing and processing the necessary export documentation.
- Packing into the Container: Charges for packing the products into the shipping container.
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Transfer of Ownership and Costs: Once the goods are loaded onto the ship, ownership and the responsibility for transport, insurance, clearance, and delivery to the destination shift to the buyer or client.
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Landed Pricing:
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Definition: Landed pricing encompasses all costs associated with the product until it reaches the buyer's designated location, excluding local duties and taxes.
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Components of Landed Pricing:
- Delivery to Client: The cost of transporting the goods from the port to the buyer's location.
- Exclusion of Local Duties and Taxes: Landed pricing does not include the customs duties and taxes imposed by the buyer's country.
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Transfer of Ownership and Costs: Ownership and the responsibility for transport, insurance, clearance, and delivery to the destination are retained by the seller until the goods reach the buyer's location.
Understanding these terms is crucial for businesses engaged in international trade, as they directly impact pricing strategies, risk management, and overall supply chain efficiency. The clear demarcation of responsibilities and costs at different stages of the shipping process facilitates smoother transactions and ensures transparency between buyers and sellers in the global marketplace.
FAQs
FOB, which stands for freight on board or free on board, is the price the buyer pays to acquire products. It doesn't include shipping or import fees. Landed cost is the sum of all expenses associated with shipping goods to their final destinations.
What is the difference between FOB and price? ›
FOB pricing refers to when the retailer/buyer is responsible for the shipping costs from the seller's warehouse to the retailer's/buyer's destination. Delivered Price Meaning: When a brand is responsible for delivering its product(s) to a retailer/receiver they have agreed to a delivered pricing arrangement.
What is the difference between FOB and ELC? ›
In summary. Ex-Factory Cost: The cost of the product at the factory, excluding any transportation or associated costs. FOB Cost: The Ex-Factory Cost plus the cost of loading the goods onto the transportation mode, with the buyer responsible for further transportation and associated expenses.
What is the difference between FOB source and FOB destination? ›
In a FOB shipping point agreement, ownership transfers from the seller to the buyer once the goods are delivered to the point of origin. At this shipping point, the buyer becomes the owner and bears the risk during transit. Alternatively, FOB destination places the delivery responsibility on the seller.
What is the difference between FOB origin and destination pricing? ›
FOB Origin means the buyer assumes all risk once the seller ships the product. FOB Destination means the seller retains the risk of loss until the goods reach the buyer. FOB terms impact inventory, shipping, and insurance costs.
What is the difference between FOB and landed price? ›
What is the difference between FOB and landed cost? FOB, which stands for freight on board or free on board, is the price the buyer pays to acquire products. It doesn't include shipping or import fees. Landed cost is the sum of all expenses associated with shipping goods to their final destinations.
What does FOB pricing mean? ›
The FOB (Free On Board) price is the price of goods at the frontier of the exporting country or price of a service provided to a non-resident. It includes the values of the goods or services at the basic price, the transport and distribution services up to the frontier, the taxes minus the subsidies.
What does FOB mean? ›
FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer.
What are the two types of FOB? ›
FOB stands for Free on Board, and it dictates where the responsibilities are split between the buyer and seller during the shipping process of international transactions. There are two forms of FOB: FOB Origin (or FOB Shipping Point) and FOB Destination.
Who pays freight on FOB? ›
FOB Origin, Freight Collect: The buyer pays for freight and shipping costs and assumes full responsibility for the cargo. FOB Origin, Freight Prepaid, & Charged Back: The seller does not pay the cost of shipping, but instead adds the freight costs to the invoice sent to the buyer.
In other words, the supplier is “free” of responsibility. 'On board' simply means that the goods are on the ship. As such, FOB shipping means that the supplier retains ownership and responsibility for the goods until they are loaded 'on board' a shipping vessel. Once on the ship, all liability transfers to the buyer.
What is the difference between origin and destination sourcing? ›
One of the key areas to know when it comes to sales tax is “sourcing,” which means the location where a sale is taxed. Origin-sourced sales are taxed where the seller is located, while destination-sourced sales are taxed at the location where the buyer takes possession of the item sold.
Who owns FOB shipping point vs destination? ›
In a FOB shipping point contract, the seller transfers any title of ownership to the buyer upon the product leaving the seller's location. The buyer then has full ownership. In a FOB destination sale contract, the buyer may not receive the title of ownership until the product reaches the buyer's location.
What is the difference between FOB and standard cost? ›
The primary difference between using cost and freight (CFR) and free on board (FOB) shipping lies in who must pay for various shipping or freight costs—the buyer or the seller.
What does FOB mean car price? ›
Literally Means "Free On Board" The term F.O.B. literally means Free On Board and is a term from the shipping industry. The technical definition is that the seller pays for transportation of the goods to the port of shipment, plus loading costs, and then the buyer is responsible for the marine freight and insurance.
What does the FOB mean? ›
FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer.
What does FOB mean in purchasing? ›
First of all, FOB – or F.O.B. – stands for Free On Board. It is the point in the supply chain where the seller relinquishes ownership, and the buyer accepts ownership of products purchased in a specific transaction.
