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LogoutThe term “free on board” refers to whether the vendor or the customer is responsible for items that are damaged or destroyed during transportation. When a product is sold “FOB shipping point” or “FOB origin,” the customer assumes risk and ownership of the items once the seller ships the product. Historically, FOB exclusively referred to products delivered by ship; however, the word has subsequently been broadened to cover all modes of transportation in the United States.
The supplier shall record a sale at the point of departure from its shipping terminal for accounting purposes. The term “FOB origin” refers to the buyer paying the transportation costs from the factory or warehouse and taking possession of the products as soon as they leave the site of origin. The term “FOB destination” refers to the seller’s risk of loss until the items are delivered to the buyer.
FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer.
Free on board indicates whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping. When used with an identified physical location, the designation determines which party has responsibility for the payment of the freight charges and at what point title for the shipment passes from the seller to the buyer.