Oregon Construction Contractors (CCB) Practice Test

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What does FOB Freight Prepaid imply about shipping charges?

The buyer covers shipping costs
The seller is responsible for shipping costs
Shipping costs are split between buyer and seller
The buyer only pays if the shipping is delayed

The correct answer is: The seller is responsible for shipping costs

When a shipping term states "FOB Freight Prepaid," it indicates that the seller is responsible for paying the shipping costs to transport goods to the buyer. This means that the seller has taken on the financial responsibility for the transportation, ensuring that the goods are delivered to the agreed location, typically before they are considered the responsibility of the buyer. Under these terms, the seller pays the freight charges upfront, which may be included in the total sales price. This understanding of "FOB Freight Prepaid" is fundamental in shipping and logistics as it clarifies the financial obligations of each party. The buyer can expect that shipping fees will not be an additional charge on their end, as they are already accounted for by the seller.