Free on Board is a shipment term used to indicate whether the seller or the buyer is liable for goods that are damaged or destroyed during shipping.
FOB shipping point or FOB origin means the buyer is at risk once the seller ships the product. The purchaser pays the shipping cost from the factory and is responsible if the goods are damaged while in transit.
FOB destination means the seller retains the risk of loss until the goods reach the buyer.
FOB was used only to refer to goods transported by ship—in the U.S., the term has since been expanded to include all types of transportation.
The most common international trade terms are Incoterms, which the International Chamber of Commerce publishes, but firms that ship goods within the U.S. must also adhere to the Uniform Commercial Code.