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. Incoterms

    Trade terms published by the International Chamber of Commerce ...
  2. Delivered Ex Ship - DES

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

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

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

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

    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. Exploring The Current Account In The ...
    Economics

    Exploring The Current Account In The ...

  4. What Is The Balance Of Payments?
    Economics

    What Is The Balance Of Payments?

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center