What is FOB?

What is FOB? This is a common question among those new to the shipping industry and a great investigation, indeed. Neglecting to properly understand this concept can result in the loss of masses of bucks.

The best FOB definition is in the meaning of the acronym itself, which is Free on Board, though some like to utilise the FOB definition of Freight on Board. Either way, this term suggests to the ship crew at what point during the shipping process the buyer of the product is not responsible for charges.

Some may wonder what the seriousness of understanding the FOB definition is, and there are several reasons that explain why understanding this idea is crucial. The terms FOB decides the chance of loss concerned as the product is transferred from the seller to the buyer. Similarly, the buyer can lose a lot of cash in being unaware of these terms as they stipulate the amount of money owed for the cargo, and this will add up to a sizeable amount of cash especially for bigger load.

Many are still confused at their options upon hearing the general definition. There are four standard selections in FOB. First, the vendor can have responsibility for coughing up for all the delivery charges while the buyer is accountable for insurance on the product, and this technique is commonly known as CF Pay Freight to Destination. Others prefer to build an FOB Destination which places a higher responsibility on the vendor as they’re responsible for both the cost to ship as well as the chance of loss. FOB Shipping Point is the exact opposite ; the buyer is answerable for charges and possible damage. Finally, the selection of Pay Insurance and Freight to Destination stipulates the seller is answerable for taking insurance on the product to guard it during the shipment.

Buyers of imported products who’ve been doing so for some time and haven’t ever been presented with their FOB options should inquire as they are subject to the terms set by the shipper, and these are often not to their advantage.

In the event the product becomes missing in the shipping process, the buyer could be answerable for covering such damage. Often consumers will carry insurance on the cargo, but again this is something that ought to be determined previously in the terms and conditions. For this reason, all purchasers of shipped goods should understand the idea of FOB.

Learn about FOB Destination and FOB Origin and other stadiums. More answers to what is FOB?