What Is FOB?
FOB, short for Free on Board, is a crucial term used in international shipping to denote when the liability and ownership of goods transfer from seller to buyer. In FOB transactions, the seller is responsible for transportation of the goods to the port of shipment, and for loading costs. Once the goods are on board the vessel, the risk shifts from the seller to the buyer.
In the realm of international trade, understanding FOB or Free on Board is essential. This term is critical in determining both costs and liabilities in shipping contracts. Under FOB terms, the seller assumes the risk and expense until the goods are loaded onto the shipping vessel. After this point, the buyer bears the responsibility.
FOB Shipping Point vs FOB Destination
There are two main types of FOB: FOB Shipping Point and FOB Destination.
- FOB Shipping Point: The buyer assumes responsibility as soon as the goods leave the seller’s premises.
- FOB Destination: The seller retains the risk and responsibility until the goods reach the buyer’s location.
Related Freight Glossary Terms
- Container Freight Station (CFS)
- Container Yard
- Free Carrier (FCA)