Free On Board - FOB
Categories: Company Management
You make nutritional supplements that were recently banned by the FDA. So you’re shipping your current inventory from San Diego to Jakarta for resale there. As such, you have to deal with rules related to international shipments... things like Free On Board.
The FOB question comes down to this: at what point in the ship’s progress do the supplements stop being your problem, and become the problem of the Indonesian company that bought them?
There are two FOB options. “FOB origin” indicates that the party receiving the goods assumes liability as soon as it leaves its shipping point. So as soon as the boat takes off from San Diego, it’s the Indonesian company’s liability. As the originator, you are free on board, as it were.
The opposite status is called “FOB destination.” It means the seller retains liability until it reaches its destination. So, until the supplements get to Jakarta, you have to worry about them.