Free On Board - FOB

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What does 'Free On Board - FOB' mean

Free on board (FOB) is a trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail.

When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier.

BREAKING DOWN 'Free On Board - FOB'

Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery and payment, when the risk of loss shifts from the seller to the buyer, as well as who pays the costs of freight and insurance.

The most commonly known trade terms are Incoterms, which are published by the International Chamber of Commerce. These are often identical in form to domestic terms, such as the American Uniform Commercial Code, but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms.

It's important to realize that because this is a legal term, its exact definition is much more complicated and differs by country. It is suggested that you contact an international trade lawyer before using any trade term.

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RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Find out about free on board shipping, the obligations of parties involved and the costs parties must assume in free on board ... Read Answer >>
  2. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

    Learn about Ex Works and Free on Board, the main difference between these Incoterms, and the responsibilities of buyers and ... Read Answer >>
  3. What determines if an international trade is Ex Works (EXW) or Free on Board (FOB)?

    Find out more about the Incoterms rules and what determines if an international trade agreement is an ex works or free on ... Read Answer >>
  4. What is the distinction between Free on Board (FOB) shipping point and destination?

    Find out more about free on board shipping point and free on board destination and the difference between these international ... Read Answer >>
  5. How does the International Chamber of Commerce define the term 'Free on Board' (FOB)?

    Find out more about the International Chamber of Commerce, Incoterms rules and how the International Chamber of Commerce ... Read Answer >>
  6. Why is a Free on Board (FOB) designation important for freight transportation?

    Find out more about free on board destination, the variations of FOB destination and why FOB destination is important for ... Read Answer >>
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