What is the significance of Free on Board (FOB) Shipping Point?

The significance of Free on Board (FOB) Shipping Point is that responsibility for the cargo shifts to the buyer once it leaves the shipper. This means that as soon as the goods are loaded onto the shipping vessel or at the specified location, the risk of loss or damage to the cargo is transferred from the seller to the buyer.

In practical terms, if there were to be any issues with the cargo during transport—such as damage or loss—the buyer would be responsible for addressing those issues because they now own the goods, even though they are still in transit. This principle is crucial for defining the responsibilities of both parties in a transaction, especially concerning shipping and liability during the transportation process.

The other options do not accurately reflect the implications of FOB Shipping Point. For instance, ownership does not transfer after delivery; it changes at the shipping point. Similarly, ownership is not retained by the seller until payment is made, as ownership transfers at the shipping point regardless of payment status. Lastly, coverage does not apply only while cargo is on the ship, as this would not adequately account for the transfer of risk that occurs when cargo is shipped under FOB terms.