Under FOB destination with prepaid freight, who pays for shipping charges?

Under FOB destination with prepaid freight, who pays for shipping charges?

• A. The supplier only
• B. The manufacturer only
• C. The receiver, as part of their invoice
• D. The shipping company, which covers costs

Answer: (C)

Under FOB (Free on Board) destination with prepaid freight, the arrangement indicates that the seller is responsible for the shipping charges until the goods reach the buyer’s location. This means that the supplier covers the cost of transportation, which is usually included in the terms of sale. The receiver is not responsible for shipping charges according to the standard interpretation of FOB destination terms, as the buyer only assumes responsibility for the goods once they arrive. Additionally, since the shipping costs are prepaid, they are typically reflected in the invoice as part of the total cost, or absorbed by the supplier depending on their pricing strategy. In this context, the concept of shipping charges caused some confusion. The correct answer highlights that the shipping costs are handled as part of the transaction process, but they are not directly paid by the receiver at the point of their invoice; rather, the supplier accounts for these costs as part of the overall price of the goods. The focus is on how the shipping terms define responsibility and costs in a typical FOB destination scenario.

Under FOB (Free on Board) destination with prepaid freight, the arrangement indicates that the seller is responsible for the shipping charges until the goods reach the buyer’s location. This means that the supplier covers the cost of transportation, which is usually included in the terms of sale.

The receiver is not responsible for shipping charges according to the standard interpretation of FOB destination terms, as the buyer only assumes responsibility for the goods once they arrive. Additionally, since the shipping costs are prepaid, they are typically reflected in the invoice as part of the total cost, or absorbed by the supplier depending on their pricing strategy.

In this context, the concept of shipping charges caused some confusion. The correct answer highlights that the shipping costs are handled as part of the transaction process, but they are not directly paid by the receiver at the point of their invoice; rather, the supplier accounts for these costs as part of the overall price of the goods. The focus is on how the shipping terms define responsibility and costs in a typical FOB destination scenario.