More Glossary Terms

Free On Board

Free on Board, or FOB, is the point in the supply chain when the seller relinquishes ownership, and the buyer accepts ownership of products purchased in a specific transaction. Every vendor-client relationship should have FOB terms specified in their Purchase Order (PO) purchase terms.
What Does FOB Stand For?
FOB, or F.O.B., is the acronym for “free on board.” In transportation, this term indicates when the responsibility for a shipment of goods is transferred from the seller to the buyer during transportation.
FOB designation is predominantly used in international ocean transportation. Free on Board (FOB) is the same as Freight on Board and they can be used interchangeably.

Additional FOB terms include:

  • FOB Origin refers to the moment the buyer assumes the title of a shipment, the moment the freight carrier picks up and signs the bill of lading (BOL) at the origin pick-up location.
  • FOB Freight Collect refers to when the buyer is responsible for all freight charges. Also, the buyer assumes all risks for transportation, so they are responsible for filing claims in the case of loss or damage.
  • FOB Freight Prepaid refers to when the seller accepts responsibility for all freight charges and freight claims exposure.
  • FOB Destination refers to when the seller retains title and control of the goods until they are delivered. The seller chooses the transportation carrier and is responsible for the risk of transportation and filing claims in case of loss or damage.
Free on Truck (FOT) is a term used when cargo is carried by a truck and can be used when shipping goods by truck.
What is Free On Board (FOB) in International Shipping?
In international shipping, free on board (FOB) refers to the point when the ownership, transportation costs, and risk liability for an overseas shipment transfers from the seller to the buyer.
When a FOB designation is in place, the seller must deliver the goods to the named port of departure. The seller is responsible for the shipment clearing for export and loading it onto the vessel indicated in the purchase order. Then, transfer of responsibility to the buyer occurs.

FOB is one of 11 internationally recognized rules that, according to the International Trade Organization, “define the responsibilities of sellers and buyers in the export transaction.”

What is a FOB Incoterm?

A FOB Incoterm is an International Commercial Term (Incoterm) established by the International Chamber of Commerce to help buyers and sellers standardize communications, allocate costs, outline obligations for each party, and determine liability.

FOB is one of four Incoterms that apply only to sea and inland waterway transportation. They include Free on Board (FOB), Free Alongside Ship (FAS), Cost and Freight (CFR), and Cost, Insurance, and Freight (CIF).
Inco terms used for any mode of transportation include Ex Works (EXW), Free Carrier (FCA), CPT (Carriage Paid To), CIP )Carriage and Insurance Paid To), Delivered at Place Unloaded (DPU), DAP (Delivered at Place), and DDP (Delivered Duty Paid).
When is a Shipment Considered Under the Freight On Board (FOB) Rule?

A shipment may be ideal for FOB designation when:

  • The shipment is moving via ocean vessel or through an inland waterway.
  • The signed purchase order includes mutually agreed upon FOB terms.
  • The shipment is not containerized and immediately loads onto the vessel.

Track free on board (FOB) shipments with MercuryGate TMS

How MercuryGate TMS Helps Shippers with Free On Board (FOB) Shipments
When a seller and buyer agree to a FOB designation, that typically implies an international shipment.
MercuryGate TMS provides single-platform transportation management. Within the TMS, shippers gain access to features and capabilities that streamline global shipping and help ensure the best possible experience for all parties involved.
Source Reliable Transportation
With MercuryGate TMS, shippers (or sellers) can book reliable carriers to deliver their goods to the designated shipping port.
From procurement services and carrier management to load sequencing and exception management, shippers can ensure they meet their end of a FOB agreement.
Monitor Shipments from Pickup to Port

MercuryGate TMS empowers control tower visibility, decision support, and powerful business intelligence. As a result, shippers can track all modes, automate exception management, and take steps to prevent potential safety issues or delays.

Manage Export and Compliance Processes
Under FOB, the shipper (seller) is responsible for clearing the goods for export. MercuryGate TMS streamlines the processes necessary to complete tasks related to managing documentation, acquiring signatures, and scheduling dock appointments.

MercuryGate TMS provides reliable transportation, real-time tracking, and decision-making capabilities that sellers need to meet the terms of a FOB designation. See how to leverage Shipment and Order Visibility features to deliver top customer service.

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