Final answer:
The term 'FOB' stands for Free On Board, indicating the point at which the risk and cost of shipped goods are transferred from the seller to the buyer. FOB is significant in determining the costs and responsibilities in shipping agreements, with the two main types being FOB Destination and FOB Shipping Point.
Step-by-step explanation:
The term "FOB" stands for Free On Board. This is a term used in international commercial law specifying at what point the risk and expense of shipped goods shifts from the seller to the buyer. Under FOB terms, the seller is responsible for the transportation and delivery of goods to the port of shipment, and the cost of loading onto the shipping vessel. Once the goods have been loaded onto the shipping vessel, the buyer assumes the risk, and any further transportation costs.
There are two main types of FOB: FOB Destination, where the seller retains the risk until the goods reach the buyer's designated location; and FOB Shipping Point, where the buyer assumes responsibility once the goods leave the seller's premises.