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FOB Shipping Point question
Posted on 3/12/14 at 2:07 pm
Posted on 3/12/14 at 2:07 pm
I have the following hypothetical just asked of me by a customer:
Company A sells a widget to Customer B and Freight Company C takes possession of the widget sold by Company A to Customer B, at the loading dock.
The item was sold under the shipping terms: F.O.B. Shipping Point or F.O.B. Origin.
Freight Company C's truck leaves the dock, but before the truck can leave the premises of Company A, the truck catches fire, destroying the widget being shipped to Customer B.
Since transfer of title occurs when the widget leaves Company A, has the title to the widget officially transferred to Purchaser B, or does the title remain with Company A until the truck departs Company A's premises? Since the truck never left Company A's premises before the widget was destroyed, who is responsible to file a claim; Company A or Customer B?
Company A sells a widget to Customer B and Freight Company C takes possession of the widget sold by Company A to Customer B, at the loading dock.
The item was sold under the shipping terms: F.O.B. Shipping Point or F.O.B. Origin.
Freight Company C's truck leaves the dock, but before the truck can leave the premises of Company A, the truck catches fire, destroying the widget being shipped to Customer B.
Since transfer of title occurs when the widget leaves Company A, has the title to the widget officially transferred to Purchaser B, or does the title remain with Company A until the truck departs Company A's premises? Since the truck never left Company A's premises before the widget was destroyed, who is responsible to file a claim; Company A or Customer B?
4
Posted on 3/12/14 at 2:13 pm to HubbaBubba
My company enters into only FOB Shipping agreements and records the revenue when the goods are loaded. Not sure how that plays into your scenario, but I always assumed it was no longer our responsibility once it was loaded.
Posted on 3/12/14 at 2:13 pm to HubbaBubba
The driver would have signed paperwork accepting the goods, so Company B has the liability, in my non-expert opinion.
Posted on 3/12/14 at 2:15 pm to southernelite
quote:
The driver would have signed paperwork accepting the goods, so Company B has the liability, in my non-expert opinion.
Agreed. We have loaded several purchasing companies'trucks, only to have them stay in our yard overnight. I can't imagine my company allowing this unless we no longer had any liability.
Posted on 3/12/14 at 2:18 pm to Black n Gold
I have someone who is just looking for something to complain about. I was hoping to find someone here who knows the legalese of this. I would make the same assumptions as you.
Posted on 3/12/14 at 2:20 pm to southernelite
quote:
The driver would have signed paperwork accepting the goods, so Company B has the liability
yep
Posted on 3/12/14 at 2:20 pm to HubbaBubba
This is all assuming the truck didn't catch fire due to some gross negligence on your part. Truck rolls into a giant hole in your yard and ruptures a gas tank... pretty sure you're on the hook for that.
Posted on 3/12/14 at 2:24 pm to Black n Gold
quote:Assuming gross negligence, the insurance company that has to pay for the loss would sue Company A's commercial liability carrier. It seems that technically, Customer B would still have to file a claim.
This is all assuming the truck didn't catch fire due to some gross negligence on your part. Truck rolls into a giant hole in your yard and ruptures a gas tank... pretty sure you're on the hook for that.
Posted on 3/12/14 at 2:52 pm to HubbaBubba
Customer B has title to the goods but has recourse against Company C for the loss of property.
Posted on 3/12/14 at 3:17 pm to HubbaBubba
I think FOB and Exworks is getting confused here.
Posted on 3/12/14 at 5:52 pm to Black n Gold
quote:
My company enters into only FOB Shipping agreements and records the revenue when the goods are loaded. Not sure how that plays into your scenario, but I always assumed it was no longer our responsibility once it was loaded.
Agreed
Revenue is typically recorded when the goods are loaded onto the truck
Posted on 3/12/14 at 6:00 pm to htownjeep
quote:
I think FOB and Exworks is getting confused here.
The two are pretty much the same. The only case where I have seen Exworks is when it involves international deliveries.
From my knowledge with EXW Incoterm, the seller takes almost no responsibility. The buy still has to come and pick it up. I think the liability still switches once the goods are loaded.
The liability would still transfer and revenue recognized when the goods are loaded per FOB shipping.
The only difference is if they are talking strictly Incoterms. Then, you would still have the identifier FOB "port" or something to designate somewhere besides the seller's premises.
This post was edited on 3/12/14 at 6:01 pm
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