Certified Supply Chain Professional (CSCP) Practice Exam

What does FOB stand for in shipping terminology?

1. Freight on Board

2. Free on Board

3. Freight at Origin

4. Freight of Business

The correct answer is: Free on Board

In shipping terminology, "FOB" stands for Free on Board. This term is crucial in international trade as it defines the point at which the responsibility for the shipment's cost and risk transfers from the seller to the buyer. Under FOB terms, the seller is responsible for all costs and risks up to the point where the goods are loaded onto the vessel. Once the goods are on board, the responsibility shifts to the buyer, meaning they will take on the costs of shipping and any potential loss or damage during transit. This concept is key in understanding various shipping contracts and terms of sale. It dictates who is liable for shipping costs and risks, influencing pricing and insurance decisions for both parties involved. Knowing the difference in shipping terms like FOB is essential for supply chain professionals as it helps in effectively managing logistics and ensuring compliance with contractual agreements. Other choices may sound plausible but do not correctly capture the definition of FOB. For example, "Freight on Board" might seem like a logical choice because of the association with logistics, but it misrepresents the nature of the term. "Freight at Origin" and "Freight of Business" are not established terms in shipping and would not apply to the context in which FOB is used. Understanding terms like