If you're involved in international trade, you've likely come across the term "Free On Board" or FOB. It's an important concept to understand as it relates to shipping, incoterms, exporting and importing. In this post, we'll explore what FOB means and answer some of the most common questions about it.
Free On Board (FOB) is a shipping term that indicates when the ownership and responsibility of goods is transferred from the seller to the buyer. FOB refers to the point at which the seller's obligations end and the buyer's obligations begin.
Under FOB terms, the seller is responsible for packing and loading the goods onto a carrier at a specified location. The buyer is responsible for paying for transportation and insurance from that point onward. Once the goods are loaded onto the carrier, ownership and risk of loss transfer from the seller to the buyer.
FOB is one of several incoterms (international commercial terms) that are used in international trade. It helps clarify when ownership and risk transfer between parties, which can be particularly important when dealing with goods that are being transported across borders.
There are several variations of FOB, including FOB Destination (which means the seller is responsible for transportation costs until the goods reach their destination) and FOB Shipping Point (which means the buyer takes responsibility for transportation costs as soon as the goods are loaded onto the carrier).
Clear communication between buyer and seller is key to ensuring that FOB terms are properly understood and enforced. It's also important to have a detailed contract that specifies the exact terms of the sale.
Understanding Free On Board (FOB) is an important part of engaging in international trade. By knowing your obligations and rights under FOB terms, you can ensure that your transactions go smoothly.
