Clarification on Revenue Recognition

Dear investors,

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

Does this indicate that once the products leave the warehouse of the seller, the risk of loss and title would be transferred to the purchaser?

Thanks in advance!

(20-01-2013, 10:15 PM)Pursuitofknowledge Wrote: Dear investors,

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

Does this indicate that once the products leave the warehouse of the seller, the risk of loss and title would be transferred to the purchaser?

Thanks in advance!

What you say is incorrect. the title passes to the purchaser only when the goods is on board either a ship or plane. from your w/h to the port/airport, it's still the seller's title and responsibility. for e.g if the goods was hijacked on the way to the port/airport, then the loss is on the seller and not the purchaser.

(20-01-2013, 10:22 PM)Jacmar Wrote:

(20-01-2013, 10:15 PM)Pursuitofknowledge Wrote: Dear investors,

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

Does this indicate that once the products leave the warehouse of the seller, the risk of loss and title would be transferred to the purchaser?

Thanks in advance!

What you say is incorrect. the title passes to the purchaser only when the goods is on board either a ship or plane. from your w/h to the port/airport, it's still the seller's title and responsibility. for e.g if the goods was hijacked on the way to the port/airport, then the loss is on the seller and not the purchaser.

I found another explanation in the internet,

F.O.B. means Freight On Board. In the case of our terms, it is Freight On Board at our plant in Attleboro, Massachusetts. In broad general terms, what it does is identify the party responsible for getting the products a customer has ordered "on board" a carrier, in our case at our plant. Our preferred carrier is UPS, but because our responsibility ends with loading the "freight on board" at our plant, the choice of freight or parcel carriers is up to the customer. Now for example, if you were to see terms of F.O.B. Destination, that means that the seller is responsible for delivering the products to the customers destination as as opposed to just getting it on the truck. As you can imagine, F.O.B. terms can get very complex and the larger the transaction and freight bill, the more important it is to pay attention to detail.

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

In this situation, does that indicate after the products are being load, the risk of loss & title passes to the purchaser?

(21-01-2013, 02:41 PM)Pursuitofknowledge Wrote:

(20-01-2013, 10:22 PM)Jacmar Wrote:

(20-01-2013, 10:15 PM)Pursuitofknowledge Wrote: Dear investors,

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

Does this indicate that once the products leave the warehouse of the seller, the risk of loss and title would be transferred to the purchaser?

Thanks in advance!

What you say is incorrect. the title passes to the purchaser only when the goods is on board either a ship or plane. from your w/h to the port/airport, it's still the seller's title and responsibility. for e.g if the goods was hijacked on the way to the port/airport, then the loss is on the seller and not the purchaser.

I found another explanation in the internet,

F.O.B. means Freight On Board. In the case of our terms, it is Freight On Board at our plant in Attleboro, Massachusetts. In broad general terms, what it does is identify the party responsible for getting the products a customer has ordered "on board" a carrier, in our case at our plant. Our preferred carrier is UPS, but because our responsibility ends with loading the "freight on board" at our plant, the choice of freight or parcel carriers is up to the customer. Now for example, if you were to see terms of F.O.B. Destination, that means that the seller is responsible for delivering the products to the customers destination as as opposed to just getting it on the truck. As you can imagine, F.O.B. terms can get very complex and the larger the transaction and freight bill, the more important it is to pay attention to detail.

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

In this situation, does that indicate after the products are being load, the risk of loss & title passes to the purchaser?

These are terms used in INCOTERMS, and therefore the best definition is to refer to an Incoterms. Your trade terms sounds more like an Ex-Work and not FOB.

To avoid confusion, normally one needs to specify FOB a port of shipment. Responsibility of the seller is to deliver up to port of shipment. The moment the goods are transferred onto the vessel, the responsibility the goods is transferred to the buyer. If somehow, the goods need to be unloaded from the vessel, the responsibility remains with the buyer.

In the case of Ex-work your warehouse, then the responsibility is transferred to the buyer once the goods are loaded onto the consignee's forwarder. That sounds more like your situation.

Hope that helps.

(21-01-2013, 03:09 PM)gutman Wrote:

(21-01-2013, 02:41 PM)Pursuitofknowledge Wrote:

(20-01-2013, 10:22 PM)Jacmar Wrote:

(20-01-2013, 10:15 PM)Pursuitofknowledge Wrote: Dear investors,

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

Does this indicate that once the products leave the warehouse of the seller, the risk of loss and title would be transferred to the purchaser?

Thanks in advance!

What you say is incorrect. the title passes to the purchaser only when the goods is on board either a ship or plane. from your w/h to the port/airport, it's still the seller's title and responsibility. for e.g if the goods was hijacked on the way to the port/airport, then the loss is on the seller and not the purchaser.

I found another explanation in the internet,

F.O.B. means Freight On Board. In the case of our terms, it is Freight On Board at our plant in Attleboro, Massachusetts. In broad general terms, what it does is identify the party responsible for getting the products a customer has ordered "on board" a carrier, in our case at our plant. Our preferred carrier is UPS, but because our responsibility ends with loading the "freight on board" at our plant, the choice of freight or parcel carriers is up to the customer. Now for example, if you were to see terms of F.O.B. Destination, that means that the seller is responsible for delivering the products to the customers destination as as opposed to just getting it on the truck. As you can imagine, F.O.B. terms can get very complex and the larger the transaction and freight bill, the more important it is to pay attention to detail.

Products are generally shipped Freight on Board (FOB) from the Company’s warehouse, at which time risk of loss and title passes to the purchaser.

In this situation, does that indicate after the products are being load, the risk of loss & title passes to the purchaser?

These are terms used in INCOTERMS, and therefore the best definition is to refer to an Incoterms. Your trade terms sounds more like an Ex-Work and not FOB.

To avoid confusion, normally one needs to specify FOB a port of shipment. Responsibility of the seller is to deliver up to port of shipment. The moment the goods are transferred onto the vessel, the responsibility the goods is transferred to the buyer. If somehow, the goods need to be unloaded from the vessel, the responsibility remains with the buyer.

In the case of Ex-work your warehouse, then the responsibility is transferred to the buyer once the goods are loaded onto the consignee's forwarder. That sounds more like your situation.

Hope that helps.

Gutman is correct. the proper incoterm is "ex-works" or "ex-w/h". FOB applies on to a carrier and a Hawb/awb is issued. once a HAWB/awb is issued then title passes to buyer.

Hi Jacmar & Gutman,

thanks for the clarification, I do have a better understanding of the company revenue recognition now!