Free On Board (FOB)
The term free on board (FOB) was defined in the International Chamber of Commerce’s Incoterms (International Commercial Terms) 2020 as the specific point until which the seller retains full responsibility and costs associated with the goods being transported.
Most commonly, the terms “FOB Origin” and “FOB Destination” are used in trade agreements.
FOB Origin means the seller is responsible for the goods up until it is done loading onto the designated mode of transportation at the place of origin. This arrangement means the buyer assumes all risk if goods are lost or damaged during transit and bears the transportation costs.
Conversely, FOB Destination means the seller retains full responsibility until the goods reach the buyer’s specified destination. Under this agreement, the seller often bears transportation costs.
This concept is crucial in logistics because it is directly linked to risk allocation responsibility clarification. The term specifies who is liable for potential damages, losses, or delays during transportation. Also, it determines who bears the transportation and damage costs between the buyer and the seller.
While FOB is used for transporting goods via sea or inland waterway, a related term – free on truck (FOT) refers specifically to transportation via trucks.
English