FOB: Free On Board (Incoterms® 2020)
Under FOB the seller clears the goods for export and loads them on board the ship the buyer has nominated at the port of shipment. Risk passes once the goods are on board.
Quick facts
How to write it
FOB + the named port of shipment + Incoterms 2020, for example: FOB Busan Incoterms 2020.
What the seller does
- Clears the goods for export.
- Delivers the goods on board the buyer's nominated vessel at the named port within the agreed period.
- Pays the costs and carries the risk until the goods are on board.
- Provides proof of delivery, usually a bill of lading showing the goods loaded.
What the buyer does
- Books the ship and pays the sea freight.
- Takes the risk once the goods are on board and insures if it wishes.
- Pays destination charges and unloading.
- Clears the goods for import and pays duties and taxes.
When to use it
FOB is meant for sea and inland waterway transport where goods are loaded directly on board, such as bulk and break-bulk cargo. It is widely used for containers too, but the ICC recommends FCA for container shipments.
Common mistakes
- Using FOB for containers without thinking about the gap between handing over the container at the terminal and loading it on board.
- Confusing it with the American domestic "FOB destination" or "FOB shipping point" terms, which are not Incoterms.
- Forgetting the edition and port, for example writing only "FOB" on the invoice.
FOB vs CIF
In both, risk passes when the goods are on board at the port of shipment. Under FOB the buyer pays the sea freight and insurance; under CIF the seller pays the freight to the destination port and minimum insurance.
A plain-language summary of Incoterms® 2020 for everyday use. The full rules are published by the International Chamber of Commerce (ICC), and your contract wording decides. Incoterms® is a registered trademark of the ICC.
All 11 Incoterms 2020 rules
Common questions
Does FOB include freight?
No. Under FOB the buyer books and pays the sea freight. The seller's price covers the goods delivered on board at the port of shipment.
Is FOB right for container shipments?
It is commonly used, but the ICC recommends FCA for containers. With FCA the risk passes when the container is handed over at the terminal, which matches what actually happens.