What Does FOB Stand for

what is FOB:

FOB is an abbreviation corresponding to the initials of the English phrase ‘ Free on board’ which in Spanish means ‘Free’ on board, and belongs to the list of Incoterms (international trade terms).

As such, FOB is a purchase and sale agreement used in the trade to refer to the conditions, rights and obligations that exist for both the buyer and seller.

In particular, the expression “free on board”, means that obligation of the seller is the the costs and costs of mobilization of the goods to the port of origin or nearest port to the seller or producer, except the cost of insurance and freight, which means that once arrived the merchandise to the responsibility of the vessel is transferred to the purchaser.

Is important to note that the term FOB must be used exclusively for those transactions in which the means of transport is a ship, i.e., that the transfer of the goods can be made by sea or river, since sometimes it is mistakenly used to express themselves about transfers carried out by air or rail.

The parties involved in an international sale must take into account the use and management of the Incoterms since these determine the obligations, duties, and responsibilities of each of them. When we are in the presence of the FOB Incoterm is to highlight that the transfer of the risk and responsibility of the goods occurs once it is aboard the cargo ship.

Suppose that goods sold under the incoterm, FOB suffers any damage before being on board the ship then the seller will be who answer for such damages and shall be obliged to replace the goods to be transferred to its port of destination, but if the loss or damage of the goods takes place after being tackled on the ship is responsible only and exclusively with the buyer who must secure it for transfer to the insurance company.

In Mexico, the Chamber of Commerce is responsible for the publication of the terms of international trade: Incoterms, however all those people and professionals that have to do with activities of international trade must have knowledge of these.

FOB and CIF

Evident is the difference that exists between these two Incoterms, but what really differentiates FOB CIF is that in the second, freight and insurance of the goods is the responsibility of the seller, which means that after arrival of the goods at the port of destination when moved responsibility of the buyer , which is completely different from the FOB.

CIF acronym corresponds to the expression ‘ Cost insurance and freight’ which in Spanish means ‘cost, insurance and freight’.

You can read more about the CIF Incoterm here.

FOB and FAS

FAS is an acronym for the English language meaning ‘ Free alongside ship’ which in Spanish means “lying franco of the ship”. A small difference is evident in these two terms that belong to the terms of international trade. In relation to the FAS, the seller ends with its obligations once you place the merchandise to the side of the ship, transferring the risk of loss or damage to the buyer at that time, which in FOB only occurs when it is located on board the ship.

If you’re interested the meaning of logistics click here.

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