Free On Board - FOB

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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.

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 is the difference between Cost and Freight (CFR) and Free on Board (FOB)?

    The difference between cost and freight (CFR) and free on board (FOB) lies in who has responsibility for various shipping ... Read Full Answer >>
  2. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  3. Why is a Free on Board (FOB) designation important for freight transportation?

    A free on board (FOB) designation specifies whether the buyer is responsible for freight charges and determines the obligations ... Read Full Answer >>
  4. How does the International Chamber of Commerce define the term 'Free on Board' (FOB)?

    The International Chamber of Commerce (ICC) is one of world's largest business organizations and has published a set of trade ... Read Full Answer >>
  5. What determines if an international trade is Ex Works (EXW) or Free on Board (FOB)?

    "Ex works" (EXW) and "free on board" (FOB) are international trade terms that dictate the responsibilities of buyers and ... Read Full Answer >>
  6. What is the distinction between Free on Board (FOB) shipping point and destination?

    "Free on board (FOB) shipping point" and "free on board destination" are international trade terms that specify where the ... Read Full Answer >>
  7. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

    Ex Works (EXW) and Free on Board (FOB) are Incoterms used to describe situations where sellers deliver goods. Ex Works describes ... Read Full Answer >>
  8. What is the difference between CIF and an incoterm?

    The International Chamber of Commerce (ICC) established 12 terms in 1936 known as International commerce terms or Incoterms. ... Read Full Answer >>
  9. Where can I find the terms governing my CIF in different ports of call?

    Cost, insurance and freight (CIF) is one of the 12 International Commercial Terms (Incoterms). The International Chamber ... Read Full Answer >>
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