Free on board (FOB) is a widely used international trade term that signifies the point at which the responsibility and ownership of goods is transferred from the seller to the buyer. FOB indicates the location at which shipping costs and risks associated with transportation are divided between the parties involved.
In this context, FOB refers to a contractual agreement between the buyer and seller, denoting that the seller has fulfilled their obligation to deliver the goods when it is placed on board the agreed carrier at the specified origin location. The specific origin location is typically mentioned with the term FOB, for instance, "FOB Shanghai."
Under FOB terms, the seller is responsible for the costs and risks associated with delivering the goods to the specified place of shipment, including export clearance and loading onto the carrier. Once the goods are on board, the expenses and risks are transferred to the buyer, who becomes responsible for transportation costs, insurance, and any potential damage or loss incurred during transit.
Furthermore, FOB can also indicate the point of delivery from the seller's perspective, where the seller's remaining costs and risks end, and the buyer's responsibilities begin. This means that the buyer must arrange and pay for transportation beyond the FOB point, as well as any necessary import clearance or taxes.
In summary, FOB is a fundamental term in international trade that delineates the transfer of ownership and risk associated with shipping goods between the seller and buyer, specifically highlighting the place of delivery and the party responsible for associated costs and risks at that location.
