What does Free On Board terms of shipping involve?

Free On Board, or FOB, shipping terms indicate that ownership of any goods being shipped transfer from the seller to the buyer when the goods reach the vehicle of transport. All costs leading up to the vehicle are borne by the seller while transport costs are borne by the buyer.

Sellers that agree to FOB shipping terms are required to deliver all of the buyer's purchased goods to a vessel that is chosen or designated by the buyer. Once the seller deposits the goods at the transport vessel, all risks associated with the shipment shift to the buyer. FOB shipping terms are clarified through the Incoterms sales terms.