The full form of FOB is Free On Board or Freight On Board.
FOB is a crucial shipping term that defines when the responsibility and ownership of goods transfer from the seller to the buyer. Essentially, it dictates who is liable if the goods are damaged or lost during transit.
Here's a breakdown:
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Free On Board (FOB): Indicates that the seller is responsible for delivering the goods to a specific point (usually a port or another shipping location). Once the goods are loaded "on board" the vessel (ship, plane, etc.), the responsibility and liability shift to the buyer.
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Seller's Responsibilities: Includes packaging, transportation to the port, loading the goods onto the carrier, and export clearance (if applicable).
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Buyer's Responsibilities: Includes all costs and risks associated with the goods from the moment they are loaded onto the carrier, including freight charges, insurance, import duties, and transportation from the destination port to their final location.
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The specific terms of the FOB agreement are crucial, and the location specified after "FOB" (e.g., "FOB Los Angeles") is extremely important. This location indicates the point at which the transfer of responsibility occurs.
In summary, "Free On Board" or "Freight On Board" are terms that clearly define the responsibilities of the seller and the buyer in an international transaction, especially regarding transportation costs, liability and insurance. It's a critical piece of information for understanding who bears the risk of damage or loss during shipment.
