FOB Incoterms 2020: Free On Board
Under FOB the seller clears the goods for export and loads them on board the ship the buyer nominated. Risk passes once they are on board; the buyer pays the ocean freight.
FOB Free On Board
Sea and inland waterway only
| Step | FOB |
|---|---|
| Export packing and marking | Seller |
| Loading at the seller's premises | Seller |
| Export customs clearance | Seller |
| Transport to the port or terminal | Seller |
| Terminal charges and loading at origin | SellerRisk passes to the buyer here |
| Main carriage (ocean or air freight) | Buyer |
| Cargo insurance | Not required by the rule |
| Unloading at destination terminal | Buyer |
| Transport to the named place | Buyer |
| Unloading at the named place | Buyer |
| Import clearance, duties and taxes | Buyer |
- FOB
- Risk passes: When the goods are on board the vessel nominated by the buyer at the named port of shipment.
- Costs: On board at the port of shipment, export cleared. The buyer pays ocean freight and everything after.
What does FOB mean in Incoterms?
FOB Incoterms means Free On Board. The seller clears the goods for export and loads them on board the ship the buyer has nominated at the named port of shipment. Risk passes to the buyer once the goods are on board. The buyer books and pays the ocean freight, the insurance and the import costs.
FOB is a sea and inland waterway rule. It always names the port of shipment: "FOB Busan, Incoterms® 2020", never "FOB destination".
Seller and buyer obligations under FOB
| Seller | Buyer |
|---|---|
| Delivers and loads the goods on board the nominated vessel at the named port | Books the ship and tells the seller the vessel, loading point and date |
| Clears export and pays export fees | Pays ocean freight and insurance it wants |
| Pays all costs until the goods are on board | Bears the risk from on board |
| Provides the commercial invoice and proof of delivery | Clears import and pays duties and taxes |
Example
A buyer in Australia orders steel coils "FOB Busan, Incoterms® 2020". The Korean mill trucks the coils to the port, clears export and pays for loading. Once the coils are on board the buyer's ship, a storm at sea is the buyer's risk, covered by the insurance the buyer bought.
FOB vs CIF vs CFR
All three rules pass the risk at the same point: on board the ship at the port of shipment. What changes is who pays the ship and the insurance.
| FOB | CFR | CIF | |
|---|---|---|---|
| Ocean freight paid by | Buyer | Seller | Seller |
| Cargo insurance | Not required (buyer usually buys it) | Not required (buyer usually buys it) | Seller must buy minimum cover |
| Place named in the contract | Port of shipment | Port of destination | Port of destination |
| Best for | Buyers with their own forwarder and freight rates | Buyers who want the freight in the price | Buyers who also want the seller to insure |
Read the full rules for CFR and CIF, or compare any two in the Incoterms chooser.
FOB vs FCA: which is right for containers?
FOB was written for goods loaded straight onto a ship. A container is usually handed to the terminal days before loading, while the seller still carries the risk under FOB but no longer controls the box. That is why the ICC recommends FCA for container shipments. If you do use FOB for containers, agree in the contract who pays the terminal handling charges at origin, a frequent source of disputes.
How to write FOB Incoterms on a contract or invoice
Write the rule, the named port of shipment and the edition. Add the terminal if the port is large.
- Right: "FOB Port of Vancouver, Incoterms® 2020" or "FOB Busan New Port, Incoterms® 2020".
- Wrong: "FOB" on its own, "FOB factory" or "FOB Chicago" for a sea shipment. None of these names a loading port.
Put the same wording on the proforma invoice, the sales contract and the commercial invoice.
FOB shipping point vs FOB destination in the United States
In US domestic trade, "FOB shipping point" and "FOB destination" are not Incoterms. They come from US commercial practice and the Uniform Commercial Code, and they also work for trucks and rail.
| FOB shipping point (FOB origin) | FOB destination | |
|---|---|---|
| Ownership and risk pass | When the carrier picks up the goods | When the goods reach the buyer |
| Who files a claim for damage in transit | Usually the buyer | Usually the seller |
Who pays the freight is a separate term, such as "freight prepaid" or "freight collect". For an international sale, write "Incoterms® 2020" after the rule so nobody reads it as the US domestic term.
FOB value and customs
Many importers compare supplier offers on FOB value, because it excludes the freight the buyer controls. Customs authorities differ: the United States values most imports without international freight and insurance, while the EU and many other countries use a value that includes them (a CIF type value). Add freight, insurance and duty to reach your landed cost.
Whatever the rule, the seller provides a commercial invoice that names the Incoterm and place, and usually a packing list. For quotes before the order, use a proforma invoice with the same rule written on it.
Features
- Who does each step under FOB
- Where risk passes, marked on the chart
- Compare FOB with FCA or any other rule
- Link to the Incoterms chooser
Frequently asked questions
What does FOB mean in shipping?
FOB means Free On Board. The seller clears the goods for export and loads them on board the buyer's nominated ship at the named port of shipment. Risk passes once they are on board.
Who pays freight under FOB Incoterms?
The buyer pays the ocean freight and any insurance. The seller pays all costs until the goods are loaded on board, including export clearance.
When does risk transfer under FOB?
When the goods are on board the vessel at the port of shipment. Since Incoterms 2010 the old 'ship's rail' test no longer applies.
Can FOB be used for air freight?
No. FOB is for sea and inland waterway transport only. For air, road, rail or containers, use FCA.
What is the difference between FOB and CIF?
Under FOB the buyer pays the ocean freight and insurance. Under CIF the seller pays the freight to the destination port and buys minimum insurance for the buyer. Risk passes on board at origin under both.
What is the difference between FOB and EXW?
Under EXW the buyer collects the goods at the seller's premises and handles export clearance. Under FOB the seller clears export, moves the goods to the port and loads them on board.
Is there an FOB Incoterms 2025 or 2026?
No. Incoterms® 2020 is the current edition, in force since 1 January 2020. FOB keeps the 2020 wording until the ICC publishes a new edition.
Is FOB the same as FCA?
No. Under FCA risk passes when the goods are handed to the buyer's carrier at a named place; under FOB it passes when they are on board the ship. FCA suits containers and any mode; FOB suits goods loaded directly on a ship.