The FOB term is an acronym for Free On Board (at a named place), and actually determines where title to shipped goods passes. It is a term of delivery, as well as a price term allocating responsibility for payment as between the buyer and seller of goods. FOB and FAS terms are specifically covered under Section 2.319 of the Uniform Commercial Code.

If the FOB term is "Shipper's Dock" or similar words, that means title to the goods passes when the goods move from the shipper's shipping dock and into the custody of the carrier. Since the goods are now the buyer's goods, the buyer has the choice of carrier, and also bears the risk of damage or loss. Buyer is also responsible for the freight bill since it's the buyer's goods being carried. It is common for the buyer to let the shipper choose the carrier and pay for the freight (freight pre-paid) with freight charges being integrated with the cost of the goods.

When the FOB term is "Buyers Dock" or similar words, the title to the goods remains with the shipper until the carrier delivers it to the buyer's facility. The shipper bears all expenses, and the risk of loss or damage, until the goods are tendered for delivery at the buyer's facility. That also means the shipper has complete control over which carrier will be used. The shipper will usually prepay the freight, although goods shipped COD (Cash On Delivery) may have the freight costs as part of the total charges.

When the term is "FOB Vessel", the buyer must name the vessel, and the seller must load the goods on board that vessel at the sellers own risk and expense. If the terms are F.A.S. vessel, meaning "free alongside", at a named port, the seller must deliver the goods alongside the vessel, or on the dock designated and provided by the buyer, at seller's risk and expense in the manner usual to that port.

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