Free on Board (FOB)

Free on Board (FOB) - Gibraltar: Mosque by Sven Bannuscher on 500px
Free on Board (FOB)

Free on board (FOB) is one of the socalled International Commercial Terms (Incoterms). The Incoterms are specified contractual terms in foreign trade and were first published by the International Chamber of Commerce in Paris in 1936.

The Incoterms are clauses that can be included in foreign trade contracts to specify which part of transportation cost the seller of the goods has to pay and which part of transportation risk he bears. The Incoterms do not regulate when the legal ownership of the goods pass over from the vendor to the acquirer.

FOB means that the vendor has to bear the transportation cost and has to take into account for the transportation risk until the good passes the ship’s rail. Current guidelines for Incoterms are available from the International Chamber of Commerce.