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 (Free On Board) means the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, cleared for export. Risk passes to the buyer once the goods are on board. The buyer books and pays the ocean freight, insurance and import.
FOB is a sea and inland waterway rule. It is always followed by the port of shipment: "FOB Ningbo", never "FOB destination".
| 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 |
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 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.
In US domestic trade, "FOB shipping point" and "FOB destination" come from the Uniform Commercial Code, not from Incoterms, and they mean different things. In international contracts, write "Incoterms® 2020" after the rule so nobody reads it as the US domestic term.
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.
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.
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 the goods are on board the vessel at the port of shipment. Since Incoterms 2010 the old 'ship's rail' test no longer applies.
No. FOB is for sea and inland waterway transport only. For air, road, rail or containers, use 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.