Free on Board: Free on Board (FOB) determines which party of a business transaction is responsible for shipping charges and also refers to the location where ownership of merchandise inventory is transferred from the seller of an item to the purchaser. There are four basic FOB types: FOB Destination, FOB Origin, FOB Shipping Point and FOB Shipping Point, Freight Prepaid. FOB Destination requires that the seller of the item pay for the shipping costs of the item. In F.O.B. Origin and FOB Shipping Point, the purchaser of the item pay for the shipping costs of the item. FOB Shipping Point, Freight Prepaid requires that the seller of the item pay for the shipping cost of the item, then bill the purchaser of the item for the amount of the item plus the shipping costs. FOB also refers to the point in time when ownership of the item changes from seller to purchaser. In FOB Destination, ownership is transferred to the purchaser when the item is delivered to the purchaser's facility. FOB Origin and FOB Shipping Point require ownership to be transferred to the purchaser when the carrier picks the item up from the seller's facility.
