Free On Board

What Does Free On Board Mean?

Free on board (FOB) is a term involving the shipping of products and the party that is responsible for them while they are in transit. "Free on board destination" means that it is the seller who is responsible for the products while they are being shipped. "Free on board origin" means that it is the buyer who is liable for the loss or damage of the products while they are being shipped.

Insuranceopedia Explains Free On Board

Before shipping, buyer and seller sign a contract that indicates ownership of the items while they are in transit. If they have agreed on FOB destination, then it means that while the items are still on the ship, the seller is still the owner of these items and responsible for their safety. If they have agreed on FOB origin, the ownership is given to the buyer as well as liability for loss or damage. The default contract is FOB origin unless the buyer has specifically opted for FOB destination in the trade contract. Cost of shipping and other charges such as manual labor in the handling of goods usually determine the chosen FOB.