FOBFree On Board
FOB (Free On Board) means the seller clears the goods for export and loads them on board the vessel nominated by the buyer at the named port of shipment; risk passes once the goods are on board, and the buyer pays the sea freight and insurance. It is for sea and inland waterway only.
Where FOB hands over
The orange marker is where risk passes to the buyer. Blue bars are the seller's, yellow the buyer's.
FOB at a glance
- Transport
- Sea and waterwayNot for containers handed over at a terminal
- Risk passes
- On board vessel
- Main carriage
- Buyer paysand nominates the carrier
- Insurance
- No obligationthe party at risk usually insures
- Delivery point
- On board the vessel nominated by the buyer at the named port of shipment.
| Job | Who |
|---|---|
| Export clearance | Seller |
| Loading at origin | Seller |
| Main carriage | Buyer |
| Insurance | No obligation |
| Unloading at destination | Buyer |
| Import clearance and duties | Buyer |
When to use FOB
Use FOB when
- Bulk or break-bulk goods loaded straight onto the ship
- The buyer has its own sea freight contract
- Sea or inland waterway transport only
Avoid FOB when
- Containers handed over at a terminal (use FCA)
- Air, road or rail transport
- Origin terminal charges are not agreed in the contract
Common FOB mistakes
Containers are handed to the carrier at the terminal, often days before loading. Under FOB the seller still carries the risk until the box is on board, without any control over it. The ICC recommends FCA for containerised goods.
Domestic US contracts use FOB under the Uniform Commercial Code with a different meaning. In international trade, write 'FOB [port] Incoterms® 2020'.
Port and terminal charges at origin are argued over constantly. Agree in the contract which ones are in the FOB price.
FOB beside its neighbours
FCA hands over at the carrier or terminal instead of on board, which matches container shipping. Read about FCA.
All eleven rules
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). CartonMath is not affiliated with or endorsed by the ICC. This is a plain-language summary; the full rules are published by the ICC and the contract wording governs.
Common questions
What does FOB mean?
FOB (Free On Board) means the seller clears the goods for export and loads them on board the vessel nominated by the buyer at the named port of shipment; risk passes once the goods are on board, and the buyer pays the sea freight and insurance. It is for sea and inland waterway only.
When does risk pass under FOB?
On board the vessel nominated by the buyer at the named port of shipment.
Who pays the main freight under FOB?
The buyer arranges and pays the main carriage.
Who pays import duties under FOB?
The buyer clears the goods for import and pays any duties and taxes under FOB.
Can FOB be used for container shipments?
FOB is a sea and inland waterway rule. For containers, the ICC recommends FCA instead, because containers are handed over at a terminal before loading.