FOB: Free On Board (Incoterms® 2020)
FOB (Free On Board) means 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, and the buyer pays the sea freight.
Quick facts
Where risk and costs pass from the seller to the buyer
SellerBuyer
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.
Seller and buyer obligations, article by article (A1–A10 / B1–B10)
Incoterms 2020 gives each side ten matching articles. Here they are in plain language; the ICC text and your contract decide.
| Seller (A) | Buyer (B) | |
|---|---|---|
| A1/B1 General obligations | Provide the goods and the commercial invoice as the contract requires, plus any other proof of conformity it asks for. Documents may be paper or electronic if agreed or customary. | Pay the price as the contract requires. Documents may be paper or electronic if agreed or customary. |
| A2/B2 Delivery and taking delivery | Deliver by placing the goods on board the ship nominated by the buyer, at the loading point indicated by the buyer at the named port of shipment, or procure goods so delivered; if no point is given, the seller may choose one. | Take delivery once the goods are on board. |
| A3/B3 Transfer of risks | Bears all risk until the goods are on board the ship. | Bears all risk from then, and earlier if its ship fails to arrive or take the goods, the ship closes for cargo early, or it fails to give notice, once the goods are identified. |
| A4/B4 Carriage | No obligation to contract carriage; if agreed, the seller contracts it on usual terms at the buyer's risk and cost. Meets transport-related security requirements up to delivery. | Contract the sea carriage from the named port of shipment at its own cost. |
| A5/B5 Insurance | No obligation to insure. At the buyer's request, risk and cost, give the information the buyer needs to buy insurance. | No obligation to insure. The buyer bears the risk from delivery, so it usually buys cargo insurance for itself. |
| A6/B6 Delivery or transport document | Provide, at its cost, the usual proof that the goods are on board, and help the buyer obtain a transport document. | Accept the proof of delivery. |
| A7/B7 Export and import clearance | Carry out and pay for export clearance. Where applicable, help the buyer, at its request, risk and cost, with documents and information for transit and import clearance. | Carry out and pay for transit and import formalities. |
| A8/B8 Checking, packaging, marking | Pay for the checks (quality, measuring, weighing, counting) needed to deliver, and pack and mark the goods for the transport, unless the trade customarily ships them unpacked or the parties agreed specific packing. | No obligation to the seller. |
| A9/B9 Allocation of costs | Pay all costs until the goods are on board, including loading, the proof of delivery and export clearance. | Pay all costs from delivery, the sea freight, transit and import duties, the seller's costs of helping, and extra costs caused by its ship or its own failure to give notice. |
| A10/B10 Notices | Give the buyer sufficient notice that the goods have been delivered, or that the ship did not take them in time. | Give the seller sufficient notice of the ship's name, the loading point, the delivery date within the agreed period and any transport-related security requirements. |
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
Guides on this topic
Common questions
What is the full form and meaning of FOB?
FOB stands for Free On Board, one of the 11 Incoterms® 2020 rules. Transport: Sea and inland waterway. Delivery and risk pass to the buyer: On board the ship at the port of shipment. Main freight paid by: Buyer. Insurance: Not required. Export clearance: Seller. Import clearance and duties: Buyer.
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.
Who pays THC (terminal handling charges) under FOB?
The seller pays the costs until the goods are loaded on board at the port of shipment, and the buyer pays the costs after that, including terminal handling charges (THC) at destination. Terminals bill origin charges differently, so state in the quote and contract who pays origin and destination THC.
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