What is FOB (Free on Board)?

FOB, which stands for Free on Board (also sometimes called Freight on Board), is an international commerce term that specifies the point at which responsibility for goods transfers from the seller to the buyer. It determines who pays for shipping, who bears the risk of damage during transit, and at what point the buyer officially takes ownership of the merchandise.

The two most common variations are FOB Origin (or FOB Shipping Point) and FOB Destination. With FOB Origin, the buyer assumes ownership and shipping costs the moment goods leave the supplier's warehouse. With FOB Destination, the seller retains responsibility until the goods arrive at the buyer's location. This distinction has major financial implications — it affects insurance requirements, who files freight claims for damaged goods, and how shipping costs appear on your books.

In domestic wholesale transactions, FOB terms are typically listed on the purchase order and invoice. Many suppliers offer FOB Origin pricing (lower unit cost, buyer pays freight) and FOB Destination pricing (higher unit cost, freight included). Which option saves you money depends on your shipping volume, distance from the supplier, and whether you have negotiated freight rates with carriers.

Always clarify FOB terms before placing an order. A quote that seems competitively priced may not include freight, making the true landed cost significantly higher than expected.