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FOB (Free on Board)

FOB (Free on Board) is a shipping term that sets the point where ownership and risk pass from seller to buyer. FOB Origin means the buyer takes title and risk when the goods leave the supplier's dock; FOB Destination means the seller keeps risk until delivery. It also decides who pays freight.

FOB Origin versus FOB Destination

Under FOB Origin the buyer owns the goods in transit and usually arranges and pays freight. Under FOB Destination the seller owns them until they arrive and typically covers freight. The choice affects insurance, freight cost, and when revenue is recognized.

FOB in orders and EDI

The FOB terms appear on the purchase order and invoice, often in the FOB segment of the EDI 850 and 810. Getting them right matters for freight billing and for deciding who files the claim if a shipment arrives damaged.

Related Terms

Bill of Lading (BOL)
A bill of lading (BOL) is a legal document a carrier issues to a shipper that lists what is being transported, who ships it, who receives it, and the agreed terms. It serves three roles at once: a receipt for the goods, a contract of carriage, and a document of title.
Purchase Order (PO)
A purchase order (PO) is a buyer's official offer to purchase goods, listing items, quantities, prices, delivery dates, and ship-to location. It becomes a binding contract once the seller accepts it. In EDI it is the 850 transaction, the document that starts most B2B order flows.
SCAC (Standard Carrier Alpha Code)
A SCAC (Standard Carrier Alpha Code) is a unique two-to-four-letter code that identifies a transportation carrier. It appears on bills of lading, EDI shipment documents, and ASNs so every party references the same carrier. The NMFTA assigns and maintains SCACs.

Learn More

EDI 850 Purchase Order GuideEDI Document Types Reference

Related Resources

Blog PostWhat Does EDI Capable Mean? Requirements GuideE-Invoicing GuideDoes Your ERP Support Peppol? What Ships Native and What Does NotEDI GuideEDI 812 Credit/Debit Adjustment: Complete GuideEDI GuideEDI 856 Ship Notice (ASN): Complete Guide

Frequently Asked Questions

FOB means Free on Board. It marks the point in a shipment where ownership and risk pass from the seller to the buyer, and it sets who pays the freight.

FOB Origin passes title and risk to the buyer at the seller's dock. FOB Destination keeps risk with the seller until the goods are delivered.

Sources: ASCM supply chain terminology

How to Answer "Are You EDI Capable?"

A buyer asked, and you need to answer this week. The four things they are checking, what you can say yes to today, and a realistic date for the rest.

  • What a buyer is really asking when they ask this
  • The minimum set-up that makes the answer yes
  • What you can answer today versus what needs building
  • Rough timelines, so you can give a date rather than a maybe

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