FOB is an acronym for Freight on Board. In North America, Freight on Board is a term that is commonly used when someone is shipping goods within the United States. It is a way to indicate who will pay loading and transportation costs. It is a contractual term and it indicates several things. It will indicate the place of the shipment and the place of destination and the terms in which the goods will be received and who will take responsibility for them. It will also indicate at which point the responsibility of the goods should transfer from the shipper over to the buyer. The term originally came from the United States “Foreign Trade Definitions of 1941”. This was a listing that described the buyers’ and sellers’ rights and obligations for various types of contracts in trade with foreign nations. The listing is now obsolete.
The FOB shipping point or FOB origin will tell you that the buyer pays all of the shipping costs and will take responsibility for the goods when they leave the seller’s location. The FOB destination will say that the seller intends to pay all of the shipping costs and will be responsible for the goods until the buyer or recipient takes possession of the goods.
For example, if there is a transaction to send some goods to New York City at the request of the buyer, the seller may say “FOB our warehouse in Ellsworth, Maine”. This means that the seller has offered to pay the shipping costs from their Ellsworth, Maine warehouse to New York City.