Definition Free On Board (FOB). Description.
Free On Board (FOB) is an international sales term used in
the transportation industry meaning that the seller fulfills his or her obligation
to deliver a commodity when they have passed a specified loading point during
a certain time period. The price includes loading the commodity on the transportation
vehicle of the buyer. Also the FOB term requires the seller to clear the goods
for export.
The risk of loss or damage is transferred to the buyer when
the goods are loaded, so the buyer must ensure transportation and insurance
from the loading point and must clear customs in the country of import. Furthermore,
when counting inventory, merchandise in transit plays a crucial role depending
on whether it is added to the company's balance sheet.
Note that because this is a legal term, its exact definition
is much more complicated and can differ by country.
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Free on Board (FOB) in Accounting Usage
"In accounting usage,
- FOB Shipping Point means the receiver (or buyer) of the goods pays the shipping costs.
- FOB Destination means the seller pays the shipping costs. Shipping point or destination is considered where the sale occurred." |
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Free On Board (FOB) Special Interest Group
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Compare with:
Cost, Insurance and
Freight
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Free On Board (FOB) Sponsor
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Special Interest Group Leader
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