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Free on Board (FOB) Shipping Point vs. Free on Board (FOB) Destination: An Overview

International commercial laws have been in place for decades and were established to standardize the rules and regulations surrounding the shipment and transportation of goods. Having special contracts in place has been important because international trade can be complicated and because trade laws differ between countries.

These international contracts outline provisions including the time and place of delivery as well as the terms of payment agreed upon by the two parties. When the risk of loss shifts from the seller to the buyer and determining who foots the bill for freight and insurance, all depend on the nature of the contract.

Free on board (FOB) shipping point and free on board (FOB) destination are two of several international commercial terms (Incoterms) published by the International Chamber of Commerce (ICC).1?

FOB shipping point and FOB destination indicate the point at which the title of goods transfers from the seller to the buyer. The distinction is important in specifying who is liable for goods lost or damaged during shipping. The primary difference between the two contracts is in the timing of the transfer of the title for the goods.2?

Free on board, also referred to as freight on board, only refers to shipments made via waterways, and does not apply to any goods transported by vehicle or by air.