Free on Board, commonly referred to as F.O.B., is a shipping designation used to specify obligations and responsibilities for goods when they are shifted from seller to buyer as sea freight. FOB is part of the incoterms list published by the International Chamber of Commerce. These terms are used to standardize shipping and freight contracts and avoid lengthy negotiations by expressing contractual obligations in simple phrases. Generally, FOB is generally specified in a sales agreement and is accounted for under inventory costs. In classic FOB contracts, sellers are relieved of responsibility and costs for their goods, once the goods are loaded onto a container ship. There are four different ways of using FOB in shipping contracts: FOB is important because it has shipping liability and accounting implications.Free on Board (FOB) Definition
FOB Contracts
Using FOB in Shipping Contracts
FOB Explanation
For example, goods marked FOB [Place of Origin] become the responsibility of the buyer during the shipping process and they are responsible for paying charges associated with moving the items from origin to destination.
In such cases, the buyer will also have to buy insurance to recover shipment costs.
Free on Board (FOB) FAQs
FOB stands for Free on Board.
Free on Board is a shipping designation used to specify obligations and responsibilities for goods when they are shifted from seller to buyer as sea freight.
In classic FOB contracts, sellers are relieved of responsibility and costs for their goods, once the goods are loaded onto a container ship.
Generally, FOB is specified in a sales agreement and is accounted for under inventory costs.
FOB is important because it has shipping, liability, and accounting implications.
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