What Is Free On Board
21 Jul
Francesca Leila Riego
21, Jul 2023

So, what does FOB mean?

All forms of domestic and worldwide shipping are commonly referred to as FOB. Shipping orders and contracts frequently specify the date and location of delivery, the method of payment, the point at which risk of loss passes from the seller to the buyer, and who is responsible for paying the freight and insurance charges.

The FOB terms of the purchase order are specified by the vendor-client transaction. The FOB status identifies which party is in charge of the shipment, whether at Origin, where the shipment starts, or at Destination, where it ends. Ownership is determined by the bill of sale or other agreement between the buyer and seller.

Free on board (FOB) should be clearly understood by all parties to facilitate a smooth transfer of goods from the vendor to the client. Whether that transfer takes place domestically or internationally, FOB conditions might affect the price of inventory, shipping, and insurance.

Comparing FOB Origin with FOB Destination

FOB origin, often known as the shipping point, denotes that ownership of the acquired items will pass to the customer at the time of shipment. Once the goods are placed with a shipping carrier, the seller's obligation ends, and it is the buyer's responsibility to make sure the goods arrive on schedule and in good condition.

For FOB destinations, the seller keeps ownership of the goods and is in charge of replacing any lost or damaged products up until the goods arrive at their final location.

International contracts establish and outline provisions, such as the time and place of delivery, payment terms, and FOB designation to define when the risk of loss shifts from the seller to the buyer and which party pays for freight and insurance, especially for businesses ordering large inventories for global shipment on vessels and containers.

FOB Pricing: What Is It?

Transportation of the goods to the port of shipment, the loading of the goods onto the shipping vessel, freight transport, insurance, as well as the unloading and transportation of the goods from the arrival port to the final destination, might all incur expenditures when the items are sold FOB.

Who Covers Shipping for FOB Origin?

The customer is liable for paying the freight fees if the terms state "FOB origin, freight collect." The customer is responsible for the products at the point of origin if the terms state "FOB origin, freight prepaid," while the seller is responsible for shipping costs.

A buyer or seller bears responsibility for the items being transported at a certain point in the supply chain when they use the shipment term "free on board" (FOB). Terms like FOB Origin and FOB Destination assist buyers and sellers understand ownership, risk, and shipping costs.

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