What Does Free on Board Mean?

Free on Board or Free on Freight is a trading term that means the quoted or invoiced price of the goods is inclusive of charges to deliver the goods to the buyer's port. The liability for the shipment varies depending on the type of FOB transaction.

In relation to shipping, Free on Board, or FOB, means that the supplier has paid for shipping costs of goods placed on board and, therefore, the buyer pays no charges. For transactions designated FOB Destination, the goods and liability belong to the supplier while in transit to the buyer. If the shipment is labeled FOB Origin, then the seller's liability ends when the good are loaded onto the ship. FOB followed by the name of a city or port is used to identify the goods.