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?

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    Learn about the differences between FOB and CIF international trade agreements and the advantages and disadvantages for sellers ... Read Answer >>
  3. What are the differences between Ex Works (EXW) and Free On Board (FOB)?

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  5. What is the distinction between Free on Board (FOB) shipping point and destination?

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