Free On Board (FOB)

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Description of Free On Board (FOB). Explanation.

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Definition Free On Board (FOB). Description.


Free On Board (FOB) is an international sales term used in the transportation industry meaning that the seller fulfills his or her obligation to deliver a commodity when they have passed a specified loading point during a certain time period. The price includes loading the commodity on the transportation vehicle of the buyer. Also the FOB term requires the seller to clear the goods for export.


The risk of loss or damage is transferred to the buyer when the goods are loaded, so the buyer must ensure transportation and insurance from the loading point and must clear customs in the country of import. Furthermore, when counting inventory, merchandise in transit plays a crucial role depending on whether it is added to the company's balance sheet.


Note that because this is a legal term, its exact definition is much more complicated and can differ by country.


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