Top Cannabis News From 9/10-9/16

Risk of Shipment

By Larry Mishkin

A term that is common to most companies that manufacture or purchase manufactured goods is “F.O.B.” which means “Free On Board” or “Freight On Board.”. Depending on whose definition is used or which state’s Uniform Commercial Code statute applies, the term takes on a few different meanings, all of which basically boil down to: (i) who pays the cost of shipping and (ii) who incurs the risk of damage, destruction or loss of the goods during shipment. The underlying principal is that by making a designation such as “F.O.B. place of shipment (or “manufacturer”)” then those related shipping costs and the risk of the loss are going to become the responsibility of the purchaser at the time the manufacturer loads the goods onto the shipping transport (truck, train, ship, etc.). If, however, the designation is “F.OB. place of delivery (or “purchaser”)” then those same costs and risks become the responsibility of the purchaser at the time the goods are unloaded at the purchaser’s warehouse or designated location for shipping.

The significance of this otherwise mundane shipping term to the cannabis/CBD industry cannot be overstated, although it is often overlooked. On more than one occasion, a client or potential client has contacted me to discuss a “lost,” “damaged,” or, worse yet, “confiscated” shipment of marijuana, CBD or products infused with either. With marijuana, it is an “intra- state” shipping problem, while with CBD or CBD-infused products, shipments are confiscated at state and international borders.

Too often, the client has a written contract that says very little about which party, shipper or purchaser, will take responsibility for these types of risks. Then, when there is a confiscation or “loss” of some kind, each party points the finger at the other, or one party belatedly acknowledges responsibility for the loss. Either way, it is too little too late and if they cannot otherwise resolve the issue amicably, then both parties are about to incur a very real legal expense.

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