Let Amplify Logistics clarify in detail. Present-day supply chains are not restricted by geographical locations. They stretch across the globe. Very few supply chains can exist in one geographic location without buying or selling raw materials or products from other nations. Needless to say, when it comes to international trade, traders have to comply with countless international laws that govern trade as well as cultural differences. All this may cause uncertainty, more so when it comes to interpreting contractual obligations and terms. Some of the most confusing terms are freight on board vs free on board. These are abbreviated as FOB.
The term FOB stands for ‘Freight on Board’ or ‘Free on Board.’ What does the term free on board FOB mean? Freight on board or free on board are terms used to indicate when ownership and liability of goods are transferred from the seller to the buyer. Free on board mainly indicates if the buyer or seller is liable for the goods that are destroyed or damaged during shipping. When FOB is used in an identified location, the designation helps identify the party that will be responsible for paying for freight charges, as well as the point title for the shipment will pass from the seller to the buyer.
When it comes to international shipping, FOB may refer to the name of the originating port. This means the consignor (seller) will be responsible for transporting goods to the port of the shipment and paying for the loading costs. On the other hand, the consignee (buyer) will pay the costs of insurance, ocean freight, unloading, and transportation costs from the port of arrival to the last destination. In this case of FOB shipping, the seller will pass the risk to the buyer once the goods get loaded at the originating port.
What is the difference between FOB and freight terms? To answer this question, you need to understand that in many cases, freight on board tends to be used in place of free on board. It is, however, vital to understand that this cannot be used as an official term. So, what exactly is Free on Board?