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FOB Full Form

Last updated date: 23rd May 2024
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Full Form of FOB

FOB stands for Free on Board. It's a term that refers to the transportation of commodities from one location to another. It means that the seller's price includes the costs of transporting items from the producing unit to a ship at the buyer's specified port. In this article, we will learn FOB price full form, FOB key full form types of FOB contract and advantages of FOB.

Type of FOB Contract

  • FOB Destination

  • FOB Origin

1) FOB Destination

It is the most typical and standard FOB contract. It means that the seller owns the items until they are loaded onto the ship as specified by the customer and that the seller is responsible for any damage or loss that occurs during transportation. The buyer becomes the owner of the items after they arrive at their destination, and he or she is responsible for any loss or damage that occurs thereafter.

2) FOB Origin

When no FOB phrase or language is used in the buy contract, the purchase contract is treated as a FOB Origin deal, according to the Uniform Commercial Code (UCC). It makes the customer the proprietor of the goods at the moment and place when they leave the manufacturing unit. The buyer, not the seller, is responsible for any loss or damage during transportation in this transaction.

How it Works

Let us understand it with the following example:

Assume you're a dry-fruits distributor named 'ABC,' and you've placed an order for 1000 jars of almonds from a company called 'XYZ,' which is based in Himachal Pradesh, India. You sell dried fruits in your New Delhi store. If your purchase contract says "FOB Destination" New Delhi, ABC warehouse, that means the company 'XYZ' will bear the transportation charges to transfer the 1000 almond jars from its Himachal Pradesh operation to your New Delhi warehouse. After the jars arrive in your warehouse, they become your property; this implies that if the jars are lost, damaged, or stolen during transportation, the company XYZ is responsible because it still owns the products until they get to their destination. Similarly, if the items are damaged or lost after they arrive at your warehouse, you will be held legally liable.

FOB Price Full Form

The full form of FOB price is Free On Board, in short FOB, is a term frequently used in shipping terms where the seller quotes a price including the cost of delivering goods to the nearest port. The buyer bears all the shipping expenses and is responsible to get the products from that port to their final destination. In simple terms, FOB signifies that the buyer is responsible for all transportation charges. Other common shipping terminologies are EXW, CFR, CIF, DAP, DDP, and so on.

FOB is a price that the buyer pays for the product excluding any of the following costs:

  • Loading

  • Insurance

  • Freight

  • Unloading

  • Customs

  • VAT

  • Import Duty

  • Transportation (from the port to the final destination)

In most cases, buyers favour FOB prices because they are less expensive than CFR, CIF, and other terms, and they have more control over shipment and transit time. To make a final selection, most customers request FOB, EXW, and DDU rates from their manufacturers or suppliers, as well as transportation charges from freight firms.

Advantages of FOB

Some purchasers mistakenly believe FOB isn't a good fit for them. This is not the case, as it provides various benefits to customers, such as:

  • One of the biggest advantages is that the buyer gets greater control over freight and freight costs. The buyer has complete control over the freight carrier, as well as the route and transit time. If the buyer does not opt for FOB, he will have no control over freight carriers or delivery times. For this reason, most customers prefer FOB over other delivery choices. For this reason, most customers prefer FOB over other delivery choices. Since buyers have no choice but to wait for the goods and pray that nothing goes wrong in transit, the manufacturer can choose any freight firm.

  • With FOB, the buyers can get insurance since they are responsible for the goods. They have the option of insuring the goods up to their final destination. Many alternative shipping choices, where the seller is responsible for delivery and insurance, do not allow for this. In most cases, products are only insured up to the target port. Furthermore, the seller is not responsible for damage caused by the port to the buyer's address.

Understanding Free on Board (FOB)

International transportation contracts frequently include abbreviated trade phrases that specify things like delivery time and location, payment, when the risk of loss moves from the seller to the buyer, and who pays for freight and insurance.

The International Chamber of Commerce (ICC) provides incoterms, which are the most frequent international trade terminology, however, companies shipping goods within the United States must also follow the Uniform Commercial Code (UCC). As there are multiple sets of rules, and legal definitions of FOB vary from nation to country, the parties to a contract must specify which set of rules will apply to a shipment.

FOB Key Full Form 

A FOB, sometimes known as a key FOB, is a compact security hardware device with built-in authentication for controlling and securing access to mobile devices, computers, network services, and data. A randomly generated access code is shown on the key FOB, which changes every 30 to 60 seconds. Users will first authenticate themselves on the key FOB with a personal identification number (PIN), followed by the current code displayed on the device.

A key FOB is a small electronic security device with built-in authentication protocols or mechanisms to allow whoever possesses it to enter a secured network or location in order to access data or services. The key FOB full form comes from the fact that a key FOB is supposed to be small enough to be carried around invisibly like a key chain.

A key FOB usually has a small screen so it can display whatever security code it was meant to contain. It is used as part of a multifactor identification process, which is required for high-security systems. A username and a PIN/password combination are the most typical security measures, however, others merely require a specific key or smart card. Two-factor identification, on the other hand, necessitates both, requiring the user to provide both their personal identifying credentials and the related security equipment, in this case, a key FOB.


We have studied FOB full form and advantages of FOB. From the above we can conclude few points:

  • The term "free on board" refers to who is responsible for items that are damaged or destroyed during delivery.

  • "FOB origin" indicates that the buyer assumes risk and ownership of the goods after the seller ships the item.

  • The term "FOB destination" refers to the seller's risk of loss until the items are delivered to the buyer.

  • The terms of FOB affect the buyer's inventory cost; adding liability for shipped goods increases inventory costs and reduces net income.

  • Legal definitions of FOB may differ between individual countries.

FAQs on FOB Full Form

Q1. What is FOB Pricing?

Ans: The costs associated with FOB include transportation of the goods to the port of shipment, loading the goods onto the shipping vessel, freight transport, insurance, and unloading and transporting the goods from the arrival port to the final destination.

Q2. What Does FOB Mean?

Ans: FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods are transferred from a seller to a buyer.

Q3. How a Key FOB is Used in Multifactor Authentication?

Ans: Key FOBs are used in the enterprise to provide two-factor and multifactor authentication, as well as to protect access to a company's network and data. In most deployments, a user first logs in to the network with a personal identification code (PIN), then enters a pseudo-random token code generated by the key FOB to gain access to the system or network.