FOB – Free on Board

Definition updated on November 2023

What does FOB (Free on Board) signify in international trade and shipping?

FOB (Free on Board) is a term used in international shipping and trade to describe the point at which the seller's responsibility for goods ends, and the buyer's responsibility begins. When a transaction is labeled "FOB [specified location]", it indicates that the seller has fulfilled their obligation when the goods are loaded on board the ship at the specified port of shipment. From that point forward, the buyer assumes all costs and risks related to the goods, including transportation, insurance, and potential loss or damage. Essentially, FOB designates the location where the ownership of goods is transferred from seller to buyer. For example, if a deal is marked "FOB Los Angeles", it means that the seller will deliver and load the goods onto a ship in Los Angeles, and the buyer takes over responsibility from there. This term is important for both parties to understand because it clarifies who will cover shipping costs, insurance, and who has liability at each stage of the shipping process.

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