Would this be considered FOB Origin or FOB Destination when the vendor quoted that inspection and acceptance is destination?
The following response is based solely on the question posed. No additional
Open full Question Details
information has been obtained or solicited in formulating the response set
forth below. The answer is for educational purposes only. It is not to be
construed as legally binding or specific direction.
The question relates to the issue of where inspection and acceptance occurs
when the contract stipulates f.o.b. origin or f.o.b. destination.
As mentioned in the question above, the general rule is promulgated by FAR
47.302(c) which sets forth that the delivery terms shall not be dictated by
the place that the quality assurance occurs or by the place of acceptance.
However, there is the exception. The provision stipulates that "if
acceptance is at destination, transportation shall be f.o.b. destination".
This point is reiterated again at FAR 47.304-1(f) which states "When
acceptance must be at destination, solicitation shall be on an f.o.b.
destination only basis". Given the both provision use and the mandatory
verbiage of "shall", it should be interpreted as clear direction.
This approach makes sense when dealing with the acquisition of commercial
items; such as the item identified in the question. In various sections of
Part 12 of the FAR, Acquisition of Commercial Items, it sets forth the
principle that the Government will rely upon the quality assurance of the
contractor. Thus, inspection of non-complex commercial items can easily be
done at destination. And since the inspection will be done at destination,
FAR mandates that the transportation term be f.o.b. destination.
As to the interpretation of the instructions set forth in NAVSUPINST
4200.85D, it does not stipulate shipping terms to be utilized. Instead,
based on the portion of the manual that was provided, the instructions are
focused upon the discrete segregation of costs between the material (end
product) and the transportation costs. In other words, when structuring the
solicitation wherein the term of shipping is f.o.b. destination, the
solicitation should instruct potential offerors that they should clearly
identify the shipping costs apart from the material costs. This falls in
line with the definition of f.o.b. destination that is set forth at FAR
47.303-6, and reads in part that " [t]he Government shall not be liable for
any delivery, storage, demurrage, accessorial, or other charges involved
before the actual delivery".