What Does FOB Mean on an Invoice?

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FOB refers to the responsibility for goods sold during the shipping process. You may see the letters FOB followed by "Destination" or "Shipping Point" or by a specific city or location. The terminology that occurs after "FOB" influences its meaning in practical terms, although it does not change what the letters stand for in the acronym: free on board.

Explanation

FOB stands for "free on board," although it is also sometimes defined as "freight on board." This does little to describe how it works in practical terms, however. If you see this designation on an invoice you received, it indicates that the person or company who sent the materials to you was responsible for them until the point that occurs after "FOB" on the invoice. If your invoice says "FOB Shipping Point," the seller or shipper was only responsible for the goods until the point they began shipping. If it says "FOB Destination" or uses your address or city in place of "Destination," the shipper was responsible for the goods until they reached you or your designated delivery address.

Practical Usage

In most cases, the responsibility for the goods really refers to their shipping cost. If your invoice says "FOB [your address]" it means the shipping costs were included in the price listed on the invoice. It may be that the seller is covering the shipping costs, or it was built into the pricing as a charge to the buyer. One common situation that requires paying special attention to the FOB notation is when you are receiving estimates rather than invoices. If you get an estimate on an item or service from multiple sellers, check for an "FOB" in the shipping costs or total charges to indicate whether shipping to your final delivery address is included in the estimate.

Term Misused

Technically, "FOB" should always indicate free shipping for the person receiving the goods, as it refers to outward-moving freight transactions. If the buyer claims responsibility of the goods at the shipping point, it is a freight-in transaction and not "free on board." Foreign Trade On-Line explains that FOB should only be used for water-based transportation, but it is commonly used for ground-based transportation as well.

Seek Clarification

If you see "FOB" on an invoice received with your shipment, most likely all charges associated with shipping are already paid and the term is simply to let you know how the shipping of your goods was paid. If you receive an invoice prior to the seller shipping the goods, look at the text that follows the "FOB" notation to determine who is responsible for shipping costs. If you have any questions, contact the seller to find out how that particular company or individual defines the term.

References

About the Author

Anne Hirsh has been writing and editing for over 10 years. She has hands-on experience in cooking, visual arts and theater as well as writing experience covering wellness and animal-related topics. She also has extensive research experience in marketing, small business, Web development and SEO. Hirsh has a bachelor's degree in technical theater and English and post-baccalaureate training in writing and computer software.

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