What is ‘FOB’ – “Free on Board?” or “Freight on Board”

What is ‘FOB’ – “Free on Board?” or “Freight on Board”

June 16th, 2009

What is ‘FOB’?   The fifth wholesale term is FOB.  FOB is a shipping term that stands for “Free On Board” or “Freight On Board”.  Whatever city is listed as the FOB, is the destination to which the wholesaler pay the costs of shipping.  If it says FOB Atlanta, GA, for instance, this means the wholesaler pays the costs to get the shipment to a terminal in Atlanta, GA.

From that point onwards you must either pick up the shipment yourself, or have it forwarded.  However, all logistics and expenses after the shipment arrives at the Atlanta, GA, terminal must be paid by you.

Typically, the FOB will be the same city where the supplier is located.   In that case, you’ll pay the shipping cost to get the shipment from the wholesaler’s warehouse to your destination.  To determine the right  Cost of Goods Sold, COGS, you must add this cost into your own shipping costs to determine the correct profit per item.

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