f.o.b.

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Free On Board

In maritime international commerce, an agreement between a seller and a buyer indicating that the seller has fulfilled his/her obligation to deliver a good when he/she has transferred it to the ship on which it will be transported. All cost and risk transfers to the buyer when the good crosses the ship's rail. The buyer designates the ship onto which the seller must deliver the good. See also: United Nations Convention on Contracts for the International Sale of Goods, Incoterm.

f.o.b.

abbrev. for free-onboard. In BALANCE OF PAYMENTS terms, f.o.b. means that only the basic prices of imports and exports of goods (plus loading charges) are counted while the ‘cost-insurance-freight’ (c.i.f.) charges incurred in transporting the goods from one country to another are excluded.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

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Bear in mind that F.O.B. terms generally apply on domestic transportation.

As far as terms like "freight collect," "freight prepaid," "freight prepaid and add," or "freight prepaid bill to a named third party" are concerned, while generally uttered in the same breath with F.O.B. terms, these are separate from such terms; but like F.O.B.

Getting to know F.O.B. terms

Even casual observations indicate that some retailers, notably appliance and furniture stores, permit their customers the flexibility of choosing between an F.O.B. origin plan and a uniform delivered plan.

Their results include the finding that a firm can obtain a greater profit by offering a menu plan instead of either an F.O.B. origin plan or a uniform delivered plan alone.

Price P(x) [P.sup.*](x) Delivered price/unit paid by customers with delivery cost x [P.sup.*](x) Optimal price/unit paid by customers with delivery cost x ([P.sub.U])[P.sub.u] (Best) uniform delivered price/unit (P.sub.F])[P.sub.f] (Best) base price/unit under an F.O.B. origin plan 3.

Using a menu of geographic pricing plans: a theoretical investigation

Some industries commonly use F.O.B. destination terms.

If your company is is the buyer of goods and the terms of sale are F.O.B. factory, you have the right to specify which carrier will perform the transportation.

Understanding terms of sale

If a sales contract does not mention any F.O.B. terms, there is a strong presumption that the terms are F.O.B.