what does fob mean?

TLDR: FOB, or "Free on Board," is a key term in international trade that defines when the responsibility and ownership of goods transfer from the seller to the buyer. It is crucial for determining risk, costs, and logistics in shipping agreements.

In international trade, FOB (Free on Board) specifies the point at which responsibility and ownership of goods transfer from the seller to the buyer. It is part of the Incoterms established by the International Chamber of Commerce, which standardizes terms to clarify obligations in trade contracts. There are two main types of FOB: FOB Shipping Point, where the buyer assumes responsibility once the goods leave the seller's premises, and FOB Destination, where the seller retains responsibility until the goods reach the buyer's location. This distinction is vital for understanding risk management, financial implications, and logistics costs.

Understanding FOB is essential for importers and exporters as it influences shipping costs, risk allocation, and financial reporting. By clearly defining responsibilities, FOB terms help mitigate disputes and enhance the efficiency of international transactions. Ultimately, FOB plays a significant role in facilitating transparent and reliable global trade agreements, ensuring smooth transfers of goods and clear negotiations between parties.