Free on board (FOB) is a term that specifying at what point respective obligation, risk, and cost involved in the delivery of goods move from the buyer to the seller under the Incoterms 2010. And example is ‘Free on Board Rotterdam Europort’. The term combined with a location indicates whether the buyer or the seller has liability for goods that are destroyed or damaged during shipment between the two parties.
The buyer and a seller agree on a designated FOB point.”FOB shipping origin” (or point) indicates that the buyer is at risk while the items are shipped, and “FOB destination” mean that the seller bears the risk of loss until the goods get to the buyer destination. But the FOB point can be anywhere in between, as long as this is specified clearly. Especially where is comes to FOB points near border crossings, the exact point is also relevant for who should pay any duties.
What many manufacturers forget is that the FOB point is an important way to distinguish themselves from their competitors. It is easy so sell ‘FOB origin’, comparable with ‘Ex Works’, but the added value of selling ‘FOB destination’ can be high, especially where it comes to smaller shipments. This can be a way to penetrate into a new market.