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FOB (Free on board)

What does FOB mean in shipping?

FOB, or Free on Board, is a term used in international trade to indicate when ownership and liability for goods transfer from the seller to the buyer. It specifies the point at which the seller is no longer responsible for the goods. This term is crucial for determining who pays for shipping, insurance, and other logistics costs, as well as who bears the risk during transit.

What does FOB origin mean??

FOB origin (also referred to as FOB shipping point) means that the buyer assumes ownership and responsibility for the goods as soon as they leave the seller's premises. The buyer is responsible for all transportation costs and risks once the goods are shipped. For instance, if goods are damaged during transit, the buyer must file a claim with the carrier.

FOB shipping point vs. FOB destination

Understanding the difference between FOB shipping point and FOB destination is crucial for managing costs and risks in logistics:

  • FOB Shipping Point:
    • Ownership Transfer: At the seller’s location when the goods are shipped.
    • Shipping Costs: Paid by the buyer.
    • Risk: Buyer assumes all risks once the goods are shipped.
  • FOB Destination:
    • Ownership Transfer: When the goods arrive at the buyer’s specified location.
    • Shipping Costs: Paid by the seller.
    • Risk: Seller assumes all risks until the goods reach the buyer.