What does F.O.B. mean?

by Mike on March 19, 2010

F.O.B is the abbreviation of the commercial phrase free on board. When used without a modifier, F.O.B means that goods are to be delivered, at the seller’s expense, on the train, vessel, airplane, truck; or other conveyance by which they are to be transported to the purchaser, who must pay the freight charges. The abbreviation or phrase, however, is ambiguous when used by itself. Therefore, it is customary for business firms to modify it with such terms as factory, destination, or the name of the shipping point or the destination. For instance, f.o.b. factory means that the purchaser is to pay the freight from the factory, although the manufacturer makes no charge for placing the goods on the train or whatever the means of transportation may be; F.O.B destination means that the freight is to be paid by the shipper or seller. This abbreviation may be either capitalized or written in small letters. It is an interesting fact, however, that C.O.D. (Cash on Delivery), is generally capitalized while [435] f.o.b. is generally written in small letters. There seems to be no good reason for the difference, but it has been the prevailing usage ever since the two abbreviations came into general use, and the distinction is recognized by most modern dictionaries.

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