Transportation Operations LINCS Practice Exam

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What does FOB signify in shipping?

A term indicating the goods’ location during transport
A resolution of disputes in freight agreements
Contractual terms that define title transfer locations
A standard measure for shipping weight

The correct answer is: Contractual terms that define title transfer locations

FOB stands for "Free On Board," and it is a crucial term in shipping that defines the point at which the ownership of goods transfers from the seller to the buyer. The contractual terms associated with FOB outline specific locations where this transfer occurs, which can impact the responsibilities for shipping costs, risks of loss, and liability. In a typical FOB agreement, if the shipping is designated as "FOB shipping point," the buyer takes title and risk once the goods leave the seller's premises. Conversely, if it is "FOB destination," the seller retains ownership and risk until the goods reach the buyer's specified location. Understanding these terms is essential for any transaction involving shipping, as they influence the logistics and financial responsibilities involved. The other options are related to shipping but do not accurately define what FOB signifies. The description about goods' location, dispute resolution, or measures of shipping weight do not capture the essence of title transfer and ownership that FOB conveys.