FOB - "Free On Board"

The term FOB, or free on board, is a term commonly used in business involving imports and exports.  Generally speaking, FOB means that the seller or exporter is 100% responsible for all goods as well as the cost of transporting them and insuring them until the goods actually reach the buyer or importer.  It is basically a form of insurance for the buyer in case of any damage or lost items or goods.  This way, the buyer is only paying for what they can turn around and sell to make a profit.  This of course only applies to the goods before they are transferred onto the buyer’s ship or other transportation vessel.  Once the buyer has received them, they are then liable for anything that happens to them from that point forward.  The term FOB, or “free on board”, is generally mostly to protect the buyer of goods more than the seller.

FOB can apply to more than just exported goods.  It can also be used in cases where freight is brought in via airplane into airports.  The term is widely open to interpretation, so the seller/exporter should definitely beware.  Read the fine print if you are selling goods to someone and be sure their idea of FOB clause is the same as yours.  If it is not, you may to have them consider revamping parts of the agreement or just agreeing to eliminate the term in the contract altogether.  Sometimes the FOB will apply in cases where the goods must be covered by the seller until they are completely delivered and sold to customers.  This really broadens the liability coverage needed for the seller but widens the scope of protection for the buyer, making it a definite plus for importers since they are protected from damage or loss.