PO Shipping Terms – Urbana Campus
The term “Free on Board” F.O.B. is commonly used when shipping goods to indicate who pays loading and transportation costs, and/or the point at which the responsibility of the goods transfers from shipper to buyer.
F.O.B. Destination (sometimes referred to as Delivered) is the preferred shipping/freight method since it provides the most protection to the University. It should be negotiated into all purchases whenever possible. F.O.B. Destination means that legal ownership of the good transfers when it reaches the department.
F.O.B. Origin or Shipping Point means that the department usually pays all shipping/freight costs and legal ownership transfers to the department when the goods leave the vendor’s warehouse. The department assumes risk of damage during transit. If a vendor requires F.O.B. Origin or Shipping Point, the department should arrange for appropriate insurance coverage for the purchased goods. The University Office of Risk Management can provide transit insurance when necessary.
A Quick Look at Shipping/Freight Terms
|Who Pays the Cost
|Who Bears the Cost
|Who Owns Goods In-Transit
|Who Assumes Transit Risk
|FOB Destination, freight prepaid
|FOB Destination, freight prepaid and Add (costs to invoice)
|Seller adds costs to the invoice
|FOB Shipping Point*
*Please Contact Purchasing
|Seller or University
|Seller or University
The department should require any shipping/freight terms to be reflected on the quote received from the vendor. The quote becomes part of the purchase order that helps clarify the agreement between the department and the vendor. When the department will pay for shipping/freight costs (see procedures below) the department needs to add one line item to the requisition with the estimated or actual shipping/freight costs and may state a maximum shipping/freight amount in the shipping/freight description line, for example: The department purchases a piece of equipment for $2,000 and the seller states estimated shipping/freight is $50. The department may add language to the shipping/freight line item with a “not to exceed” amount to allow Payables to pay for shipping/freight up to that amount “Shipping/freight not to exceed $75”.
For a majority of purchases the seller should be able to provide an actual cost for shipping/freight. However, there are times where estimated shipping/freight costs may be appropriate, for example, if the purchase requires separate shipments as goods become available. If the department believes the shipping/freight costs are excessive, the department should contact purchasing for assistance.
At a Glance:
iBuy Requisitions: The iBuy purchase order does not contain an F.O.B. Term. If the quote does not establish the F.O.B. term no shipping/freight term will be added to the Purchase Order. If the quote lists a shipping price, or notates that shipping will be added, the department adds one line for shipping/freight that includes all estimated or actual shipping/freight costs for the purchase order.
Urbana Campus Shipping Guide and Procedures
|Terms of Sale
|Responsibility for Cost and Transit Ownership
|Destination, freight prepaid
|Seller – Pays Freight Cost
Seller – Bears freight Cost
Seller – Owns goods in transit
Seller – Files claims
|Department Procedures: The Department will communicate with the seller to ensure that the seller agrees to pay the shipping/freight/freight costs and add the FOB term on the quote when possible. The Department needs to review the quote to ensure the term reflects the responsibility and cost of shipping/freight.
Purchasing Procedures: The Purchasing buyer will add the appropriate Banner shipping/freight code; for iBuy the shipping/freight term is identified on the quote and is absent on the purchase order. Purchasing will contact the department if there are inconsistencies with the quote and appropriate FOB Term.
University Payables Procedures: University Payables will not pay shipping/freight on these purchase orders without department approval. If the FOB Destination code was applied to the purchase order then the department must approve or contest the added shipping/freight terms within a reasonable period of time. If the vendor wants to add shipping/freight and the department contests the shipping/freight costs, the issue should be forwarded to Purchasing for review and resolution.
If shipping/freight is added for payment:
A change order is required to add the shipping/freight line to the purchase order.
|Destination – Prepaid and Add
|Seller – Pays freight costs and adds costs to invoice
Buyer – Bears freight costs
Seller – Owns goods in transit
Seller – Files Claims (if any)
|Department Procedures: The Department will obtain a quote with the shipping/freight term identified on the quote. The department adds one line for shipping/freight that includes all estimated or actual shipping/freight costs for the purchase order The department may add language to the shipping/freight line item with a “not to exceed” amount to allow Payables to pay for shipping/freight up to that amount “Shipping/freight not to exceed $75”. If no maximum shipping/freight amount is added to the shipping/freight line, the current Payables thresholds will prevail.
Purchasing Procedures: The Purchasing buyer will add the appropriate Banner shipping/freight code; for iBuy the shipping/freight term is identified on the quote and is absent on the purchase order. The buyer may contact the department to ensure the appropriate shipping/freight code is used.
University Payables Procedures: If the shipping/freight line is added to the purchase order and there needs to be an increase in the shipping/freight line item amount, UPAY will follow their procedure to receive approval from the department to allow payment over the line item amount. The following process prevails regarding increasing the total amount of the entire purchase order: The total value of the purchase order is under $100,000 no change order is needed from Purchasing. (Solicitation level) If all lines on the purchase order are paid and the only overage is the shipping/freight, UPAY will close the line with no communication to the department. The rest of the PO will close out in monthly batch close.
No Shipping/freight Line added – shipping/freight added on invoice: A change order is required to add the shipping/freight line to the purchase order.
|Specific terms to be discussed with Purchasing.
UPS Shipping Instructions
|Department Procedures: The Department obtains a quote with the F.O.B. “shipping point” term. Please contact Purchasing at 217-333-3505 to discuss special shipping/freight requirements.
Purchasing Procedures: When the buyer sees shipping/freight point being utilized, the buyer will contact the department and ensure that the department is aware of the University shipping/freight contract. The buyer will consult with the department on the most appropriate shipping/freight methods. The final decision will remain with the department. If the University shipping/freight contract is utilized, the buyer will cross out any shipping/freight costs on quote and attach the University shipping/freight instructions.
For units that use a departmental UPS account, a shipping line item is not needed as UPS charges the department’s UPS account directly. We encourage units to use their UPS account anytime an FOB Shipping Point – Prepaid and Add appears on the Seller’s quote.
The importing and exporting of goods are subject to the rules and regulations of U.S. Customs and may require special forms to be completed for importing or exporting. Departments needing to receive or ship goods coming from outside the United States should SEKO Worldwide Chicago for customs clearance. SEKO Worldwide Chicago has been provided with power of attorney to help streamline these deliveries.
SEKO Worldwide Chicago 1111 Chase Avenue Suite A Elk Grove Village, IL 60007 Phone: 847-238-1900 Fax 847-981-1142