Incoterms 2020 · Sea & inland waterway only

FOB (Free On Board) — meaning, responsibilities & when to use

Under FOB the seller delivers the goods on board the vessel and the buyer takes over from there. Here's what Free On Board means and how it splits cost and risk.

FOBFree On Board

FOB (Free On Board) is a sea-freight Incoterm where the seller delivers the goods on board the vessel at the named port of shipment, cleared for export. Risk passes once the goods are on board; from there the buyer pays the main freight, insurance, and import costs.

Where risk transfers

Risk passes from seller to buyer when the goods are loaded on board the vessel at the named port of shipment.

Responsibilities

Who pays for what

Seller is responsible for

Packaging and export customs clearance
Delivery and loading on board the vessel
Origin terminal/port charges up to loading

Buyer is responsible for

Main sea freight
Marine insurance
Import customs clearance and duty
Destination charges and onward delivery

When to use it

When FOB makes sense

FOB is one of the most common terms for bulk and break-bulk sea freight where the buyer wants to control the main carriage. For containerised cargo, FCA is generally the better choice because of where risk transfers.

FAQ

FOB — common questions

What does FOB mean in shipping?

FOB (Free On Board) means the seller delivers the goods on board the vessel at the named port of shipment, cleared for export. Risk and onward cost pass to the buyer once the goods are loaded.

What is the difference between FOB and CIF?

Under FOB, the buyer arranges and pays for the main sea freight and insurance. Under CIF, the seller arranges and pays for freight and insurance to the destination port. Risk still passes at loading in both cases.

Is FOB suitable for container shipping?

FOB is designed for cargo loaded directly onto a vessel. For containers handed over at a terminal, FCA is recommended because risk transfers at the terminal rather than at the ship's rail.

Other Incoterms