Free on board (FOB)
Free on board (FOB) is a trade term that indicates the point at which the seller is no longer responsible for the goods being shipped. It means that the buyer takes ownership of the goods once they are loaded onto the vessel at the specified port of shipment.
Under FOB terms, the seller is responsible for the cost of transporting the goods to the port of shipment and loading them onto the vessel. Once the goods are on board, the risk of loss or damage transfers to the buyer.
For example, if a seller in China agrees to sell goods to a buyer in the United States on FOB terms, the seller is responsible for delivering the goods to the port in China and loading them onto the ship. Once the goods are on board, the buyer becomes responsible for any further transportation costs and risks.
It is important for both buyers and sellers to clearly understand the terms of the FOB agreement to avoid any confusion or disputes during the shipping process.
Benefits of FOB:
- Clear division of responsibilities between buyer and seller
- Allows for better cost control and risk management
- Provides a standardized method for international trade transactions
Overall, Free on Board (FOB) is a widely used trade term that helps facilitate international trade by clearly defining the responsibilities of both parties involved in the transaction.
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