Free On Board - FOB

AAA

DEFINITION of 'Free On Board - FOB'

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  1. Delivered Ex Ship - DES

    A trade term requiring the seller to deliver goods to a buyer ...
  2. Delivered Duty Paid - DDP

    A transaction in which the seller must pay for all of the costs ...
  3. Delivered Ex Quay - DEQ

    In international trade, a contract specification where the seller ...
  4. Delivered At Frontier - DAF

    In international trade, a contract specification requiring the ...
  5. Cost and Freight - CFR

    A trade term requiring the seller to arrange for the carriage ...
  6. Cost, Insurance and Freight - CIF

    A trade term requiring the seller to arrange for the carriage ...
Related Articles
  1. Can The IMF Solve Global Economic Problems?
    Economics

    Can The IMF Solve Global Economic Problems?

  2. How Globalization Affects Developed ...
    Fundamental Analysis

    How Globalization Affects Developed ...

  3. Free On Board
    Professionals

    Free On Board

  4. Exploring The Current Account In The ...
    Economics

    Exploring The Current Account In The ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center