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Myself and a few co-workers are having a lively debate on how FOB Destination vs. FOB Origin is used.  We are looking at 52.257-29 - Origin.  I see this is purely a title risk issue.  The government takes the risk on from the initial shipping point.  52.257-34 - Destination, the Contractor takes the r isk until the shipment arrives and is inspected at the Government shipping location.  My coworkers are hung up on the belief that if it is FOB Destination, the shipping is free and is not listed on the quote.  If FOB Origin, the shipping is charged on the quote as one of the line items.  Unless I am missing it, I'm confused as to why this belief of theirs would be true.  Another CS's stance is that shipping is always shown on quotes regardless of the FOB type and the FOB type merely is the contractor quoting whether the Gov takes the risk at their shipping location or at the Gov's final destination for the shipment.  Any input would be appreciated.

 

 

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FOB origin versus destination indicates where liability (risk of loss) transfers from the seller to the buyer.  FOB means free on board.   So for FOB origin (place of shipment) the seller bears the expense and of getting them onto the carriers vehicle and risk of loss up to that point.  For FOB destination the seller must also bear the cost of transporting the goods and is liable for risk of loss until delivered to the destination.  In either scenario, the Government (buyer) is ultimately going pay for the shipment.  Under FOB destination terms, the contractor is going to recoup the cost of shipment, normally by either adding a line item for shipping or including it in its unit price, even though they pay for it up front.  Under FOB origin terms the government can either arrange for shipment or have the supplier bear that cost and reimburse them for it (normally as a separate line item).

See UCC §2-319(1)

Unless otherwise agreed the term F.O.B. (which means "free on board") at a named place, even though used only in connection with the stated price, is a delivery term under which

(a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier; or

(b) when the term is F.O.B. the place of destination, the seller must at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article (Section 2-503);

(c) when under either (a) or (b) the term is also F.O.B. vessel, car or other vehicle, the seller must in addition at his own expense and risk load the goods on board. If the term is F.O.B. vessel the buyer must name the vessel and in an appropriate case the seller must comply with the provisions of this Article on the form of bill of lading (Section 2-323).

https://www.law.cornell.edu/wex/free_on_board_fob

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2 hours ago, Todd Davis said:

See UCC §2-319(1)

Might be important to note that UCC does not --usually-- govern Federal Government contracting. I do believe, at times, it provides useful guidance in applying general contract principles and has been used in judicial and administrative proceedings.

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Guest Vern Edwards
21 hours ago, thecontractingguy said:

My coworkers are hung up on the belief that if it is FOB Destination, the shipping is free and is not listed on the quote.  If FOB Origin, the shipping is charged on the quote as one of the line items.  Unless I am missing it, I'm confused as to why this belief of theirs would be true. Another CS's stance is that shipping is always shown on quotes regardless of the FOB type and the FOB type merely is the contractor quoting whether the Gov takes the risk at their shipping location or at the Gov's final destination for the shipment.  Any input would be appreciated.

The OP's issue is pricing, not risk of loss. I'm not aware of a standard business practice in regard to how shipping cost appears in a quote. But in my experience, if the seller was paying for shipping, it usually appeared as a separate charge.

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Yes, Vern I was more interested in how quotes should look.  Some of us hold firm that if the quote is FOB Destination that there should be no shipping listed on the quote.  Now we all know that the price of the item was probably bumped up a little but the vendor to cover their shipping cost.  FOB Origin and we normally see the shipping as a separate line item on the quote if we are requesting for the vendor to ship for us and provide us an estimate for the shipping.

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Guest Vern Edwards

I think you should just decide how you want quotes and then ask for them that way. I don't think there is a right or wrong way, there's just the way you want to do it. Some people want to see the shipping broken out. Some don't.

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