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 itself is simple. The seller clears the goods for export and bears cost and risk until the goods are on board the chosen vessel at the named port of shipment. After that the buyer pays the freight and carries the risk.
The problem is that FOB is used for everything, including containers handed over at an inland depot a week before loading. In that case the seller loses physical control of the container long before it is loaded on board. But under FOB the seller still carries the risk until then, including during terminal handling they did not do and did not see. If the container is damaged or stolen at the terminal, the seller is in a weak position and their insurer will ask hard questions.
The 2020 revision made the intended use much clearer. FOB, together 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 shipment means nothing. It is a rule for sea and inland waterway transport only. People write it that way all the time, 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.