FOB (shipping)
In the case of Browne v Hare, settled in the Court of Exchequer Chamber in 1858, it was noted that a shipper's attempt to reserve title after shipment would have constituted a breach of the contract's f.o.b.
[3][4] Under the Incoterms 2020 standard published by the International Chamber of Commerce, FOB is only used in sea freight and stands for "Free On Board".
In 1954, in the case of Pyrene Co. Ltd. v. Scindia Steam Navigation Co. Ltd.,[8] Justice Devlin, ruling on a matter relating to liability under an FOB contract, described the situation thus: Only the most enthusiastic lawyer could watch with satisfaction the spectacle of liabilities shifting uneasily as the cargo sways at the end of a derrick across a notional perpendicular projecting from the ship's rail.In the modern era of containerization, the term "ship's rail" is somewhat archaic for trade purposes, as with a sealed shipping container, there is no way of establishing when damage occurred after the container has been sealed.
Due to potential confusion with domestic North American usage of "FOB", it is recommended that the use of Incoterms be explicitly specified, along with the edition of the standard.
In North America, FOB is written into a sales agreement to determine where the liability responsibility for the goods transfers from the seller to the buyer.
With "FOB destination", the sale is complete at the buyer's doorstep and the seller is responsible for freight costs and liability during transport.
The last distinction is important for determining liability or risk of loss for goods lost or damaged in transit from the seller to the buyer.
International shipments typically use "FOB" as defined by the Incoterms standards, where it always stands for "Free On Board".
Domestic shipments within the United States or Canada often use a different meaning, specific to North America, which is inconsistent with the Incoterms standards.
North American FOB usage corresponds to Incoterms approximately as follows: A related but separate term "CAP" ("customer-arranged pickup") is used to denote that the buyer will arrange a carrier of their choice to pick the goods up at the seller's premises, and the liability for any damage or loss belongs to the buyer.
Although FOB has long been stated as "Freight On Board" in sales contract terminology, this should be avoided as it does not precisely conform to the meaning of the acronym as specified in the UCC.
The term "Freight On Board" is not mentioned in any version of Incoterms, and is not defined by the Uniform Commercial Code in the USA.
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