Freight on board (FOB) is a commercial term widely used in international trade and shipping to indicate the point at which the ownership and liability of goods is transferred from the seller to the buyer. The term specifically refers to the transfer of ownership and responsibility for the cost of transporting goods from the seller's location to the buyer's designated destination.
In a typical FOB transaction, the seller is responsible for the delivery of the goods to a specific point, usually a named port, airport, or other terminal. Once the goods are delivered to this specified location, the ownership and risk associated with the goods pass from the seller to the buyer. This means that any loss or damage incurred during the transportation process becomes the buyer's responsibility.
FOB is often followed by the named place where the transfer occurs, such as FOB Shanghai, FOB London, or FOB New York. This designation indicates the location where the goods are handed over from the seller to the buyer, establishing a clear indication of where the responsibilities shift.
The FOB term also encompasses the payment of transportation fees and costs. If the agreement specifies FOB origin, it means that the buyer is responsible for the shipping costs and assumes ownership and liability as soon as the goods are handed over to the carrier at the origin location. Conversely, FOB destination means that the seller is responsible for the shipping costs until the goods reach the buyer's specified destination.
Overall, the FOB designation serves as a standard and widely recognized commercial practice that helps to define the responsibilities, risks, and costs associated with the transportation of goods in international trade.
