Final answer:
F.O.B (Free On Board) is a term indicating that the seller delivers goods on board a vessel at a named port of shipment, at which point the risk and responsibility shift to the buyer. As an example, if goods are marked as 'F.O.B. Mumbai', the seller must load them onto a specified vessel in Mumbai, bearing all associated costs and risks until the cargo is onboard.
Step-by-step explanation:
F.O.B, which stands for Free On Board, is a term used in international commercial law, specifically in shipping agreements. It indicates that the seller delivers goods on board a vessel designated by the buyer at a named port of shipment. This means that the seller bears all costs and risks of loss or damage to the goods until such time as they have been delivered on board the vessel. At that point, the responsibility shifts to the buyer.
For example, let's consider a situation where an American company (the buyer) purchases textiles from a vendor in India (the seller). If the shipment agreement states 'F.O.B. Mumbai', it implies that the Indian seller must deliver the textiles onto a shipping vessel at the Mumbai port. The seller assumes all the risks and costs associated with getting the textiles to and loading them on the vessel. Once the goods are on the ship, the buyer becomes responsible for the freight and any further risks and expenses.