In which of the following arrangements does freight become the expense of the buyer?Group of answer choicesFOB shipping point, collectFreight cost is always the expense of the sellerFOB destination, prepaidFOB destination, collect
Question
In which of the following arrangements does freight become the expense of the buyer?Group of answer choicesFOB shipping point, collectFreight cost is always the expense of the sellerFOB destination, prepaidFOB destination, collect
Solution
The arrangement in which freight becomes the expense of the buyer is "FOB shipping point, collect".
FOB stands for "Free On Board", which is a term in international commercial law specifying at what point respective obligations, costs, and risk involved in the delivery of goods shift from the seller to the buyer.
In "FOB shipping point, collect", the buyer is responsible for freight charges and assumes ownership of the goods as soon as they leave the seller's premises.
On the other hand, in "FOB destination, prepaid" and "FOB destination, collect", the seller is responsible for the freight charges and the ownership of the goods does not transfer until they reach the buyer's location.
Therefore, the correct answer is "FOB shipping point, collect".
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