Free On Board (FOB) is a shipping and international trade term that specifies the point at which the seller’s responsibility for the goods ends and the buyer assumes ownership and liability. FOB indicates the location where the title of the goods transfers from the seller to the buyer. The term is often followed by a specific location, such as a port or a named place.

There are two common variations of FOB: FOB Shipping Point and FOB Destination.

1. **FOB Shipping Point:**
– With FOB Shipping Point, the transfer of ownership and responsibility occurs when the goods are loaded onto the transport vehicle (e.g., ship, truck, or plane) at the seller’s shipping point. The buyer becomes responsible for the transportation costs, insurance, and any risks associated with the shipment from that point onward.

Example: FOB Shipping Point, Port of Los Angeles

In this case, the seller is responsible for the goods until they are loaded onto the ship at the Port of Los Angeles. Once loaded, the ownership and risk transfer to the buyer.

2. **FOB Destination:**
– FOB Destination means that the seller retains ownership and responsibility for the goods until they reach the buyer’s specified destination. The seller is typically responsible for shipping costs, insurance, and risks associated with the transportation of the goods until they arrive at the destination.

Example: FOB Destination, Buyer’s Warehouse

In this case, the seller is responsible for the goods until they reach the buyer’s warehouse. The buyer assumes ownership and responsibility upon arrival at the specified destination.

It’s important to note that the term FOB is often followed by a location (e.g., FOB Shanghai, FOB New York). The specified location indicates the point at which ownership and risk transfer between the buyer and seller.

Key points about FOB:

– **Risk Transfer:** FOB defines when the risk of loss or damage to the goods transfers from the seller to the buyer.

– **Transportation Costs:** FOB indicates which party (buyer or seller) is responsible for transportation costs, including shipping, insurance, and other related expenses.

– **Insurance:** Depending on the terms, either the buyer or the seller may be responsible for obtaining and paying for insurance coverage during transit.

– **Legal Implications:** The use of FOB terms is important for legal and contractual purposes, as it clarifies the rights and responsibilities of the parties involved in the transaction.

FOB is commonly used in international trade to specify the terms of sale and the point at which the buyer assumes responsibility for the goods. It is part of a set of standardized trade terms known as Incoterms (International Commercial Terms) published by the International Chamber of Commerce (ICC).