The acronym FOB, which stands for "Free On Board" or "Freight On Board," is a shipping term used in retail to indicate who is responsible for paying transportation charges. Ownership of a cargo is independent from Incoterms. FOB meaning. The buyer pays for all costs beyond that point, including unloading. It is much easier to determine when title transfers by referring to the agreed upon terms and conditions of the transaction; typically, title passes with risk of loss. ... What is more, many hidden costs relating to CIF shipping are shifted to the buyer in the port of discharge. The last distinction is important for determining liability or risk of loss for goods lost or damaged in transit from the seller to the buyer.[7][8]. "Free on Board" means that the seller fulfils his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. North American FOB usage corresponds to Incoterms approximately as follows: A related but separate term "CAP" ("customer-arranged pickup") is used to denote that the buyer will arrange a carrier of their choice to pick the goods up at the seller's premises, and the liability for any damage or loss belongs to the buyer. As with all Incoterms, FOB does not define the point at which ownership of the goods is transferred. This term is only used for water transportation either sea or inland water. FOB is one of the internationally accepted incoterms, published by the International Chamber of Commerce. Although FOB has long been stated as "Freight On Board" in sales contract terminology, this should be avoided as it does not precisely conform to the meaning of the acronym as specified in the UCC.[7]. If the seller of goods quotes a price that is FOB shipping point, the sale takes place when the seller puts the goods on a common carrier at the seller's dock. If the FOB terms of sale indicate that it is "FOB delivered," then this implies that the shipper will be responsible for all of the carrier’s costs. Knowing the different FOB combinations is important for businesses shipping and receiving freight. What Is a Purchase Order and How Can It Benefit Your Business? The acronym FOB, which stands for "Free On Board" or "Freight On Board," is a shipping term used in retail to indicate who is responsible for paying transportation charges. When referring to domestic shipping within the US, FOB can mean “Freight On Board,” but the legal meaning of the shipping term is “Free On Board.” ‘On board’ simply means that the goods are on the ship. The term FOB is also used in modern domestic shipping within the United States to describe the point at which a seller is no longer responsible for shipping costs. The term is always used in conjunction with a port of loading.[1]. When items are transported either domestically or internationally, the delivery must be accompanied by relevant documentation. The seller must clear the goods for export. How to Manage Transport Documentation: Logistics and Supply Chain, What You Need to Know About International Shipping Terms, Protect Your Business by Understanding Different Freight Charges, The 7 Best Shipping Companies for Small Business of 2021. Similar to CIF only this time insurance is not … In that case, it was the term used to generally refer to the goods shipped by sea since it was the major transportation method for shipping cargo from abroad. This indicates that the buyer has to meet all costs and risk of damage or loss of the consignment from that phase. It stands for “Free on Board” or “Freight on Board”, and it defines shipping terms specific to transit by sea and inland waterways -- it is not applicable to air, rail and road transit. 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