FOB — Free on Board
The seller loads the goods on board the vessel at the named port. The most used and most misused rule in trade.
- Group
- F — Main carriage unpaid
- Transport mode
- Sea and inland waterway only. Delivery is measured against a vessel, so it does not describe a container handover.
- Named place
- The port of shipment, where the goods are loaded on board.
- Main carriage paid by
- Buyer
- Risk passes
- On board the vessel
- Export clearance
- Seller
- Import clearance and duties
- Buyer
- Seller must insure
- No obligation on either party. Arrange your own cover.
- Unloading at destination
- Buyer.
FOB is straightforward on its own terms: the seller clears for export and bears cost and risk until the goods are on board the nominated vessel at the named port of shipment. After that the buyer pays the freight and carries the risk.
The trouble is that FOB is used for everything, including containers that were handed over at an inland depot a week before loading. In that flow the seller has lost physical control of the box long before it crosses the ship's rail, yet under FOB they still carry the risk for it — including through terminal handling they neither performed nor witnessed. If the container is damaged or stolen at the terminal, the seller's position is poor and their insurer's questions are difficult.
The 2020 revision made the intended scope much more explicit: FOB, along with CFR and CIF, is for bulk and break-bulk sea freight. The rule for containers is FCA.
"FOB" on an air freight quote or a road movement is meaningless — it is a sea and inland waterway rule. It is written that way constantly, and it leaves the contract with no agreed risk transfer point at all.
Always write the rule with its named place and the version — FOB [named place], Incoterms 2020. The rule says nothing about when ownership transfers; that is for your sales contract.