The Full Form of ‘FOB’ in Banking is ‘Free On Board’.
Full Form of FOB
The full form of FOB in banking is Free On Board. It is a term used to describe the legal responsibility of the seller and buyer when goods are transported from one country to another. The term is commonly used in international trade transactions and can have different meanings depending on whether it is being used for sea, air, or land shipments.
In general, FOB stands for “free on board”, meaning that the price of goods includes all costs up until they are loaded onto the ship or airplane at their point of origin. Once they have been loaded, the buyer assumes responsibility for any additional costs associated with shipping them to their destination. This means that if there are any customs duties or taxes due upon arrival, those would be paid by the buyer.
One important consideration when using FOB terms is determining who will bear the risk of loss during transit. This can vary based on whether a shipment is FOB origin (the seller) or FOB destination (the buyer). For example, if an item has been shipped FOB Origin, then any damage incurred during transit would be covered by the seller and not by the buyer. Conversely, if an item is shipped FOB Destination, then any damage incurred during transit would be covered by the buyer and not by the seller.
The use of FOB terms can also help to simplify payment procedures for both parties in an international trade transaction. If a shipment is sent FOB Origin then payment would typically be due upon delivery – meaning that once goods arrive at their destination, payment should follow shortly after. However, if a shipment is sent FOB Destination then payments may not be due until some other point such as after inspection or after delivery has taken place – allowing both sides more time to complete necessary paperwork before payment needs to be settled.
In addition to simplifying payment procedures and allocating risk between buyers and sellers during transport, using FOB terms can also help ensure that all parties involved understand their respective obligations under an international trade agreement. By clearly outlining who is liable for certain costs and risks associated with transporting goods over long distances it helps create certainty around who will bear what costs throughout the transaction process – helping to avoid disputes down the line which could delay payments or lead to additional charges being incurred unnecessarily due to lack of clarity around responsibilities from either side.
Overall, understanding how Free On Board terms work in banking can help both buyers and sellers alike stay informed about their respective obligations when engaging in international trade transactions – helping create certainty around cost allocations while simplifying payment procedures throughout each stage of delivery.
Queries Covered Related to “FOB”
- What is the full form of FOB in Banking?
- Explain full name of FOB.
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