Transportation Operations LINCS Practice Exam

Under freight on board terms, when does ownership of goods transfer to the buyer?

1. When goods are placed on ship designated by the buyer

2. When goods are placed on ship designated by the seller

3. When goods are at the seller's facility

4. When goods are at the buyer's facility

The correct answer is: When goods are placed on ship designated by the buyer

Under freight on board (FOB) terms, ownership of the goods transfers to the buyer when the goods are placed on the ship designated by the buyer. This means that the responsibility and title of the goods shift from the seller to the buyer at the moment the seller loads the goods onto the transport vessel specified by the buyer. This is significant because it determines liability and responsibility during transit. Once the goods are on the designated ship, the buyer assumes responsibility for any risks associated with the further transportation of the goods. This concept is fundamental in shipping and international trade, as it affects how parties view liability, insurance, and delivery obligations during the course of transporting goods. The other options indicate different points of transfer that do not align with FOB terms: placing goods on a ship designated by the seller, having them at the seller's facility, or at the buyer's facility, would not signify the transfer of ownership under FOB terms.