Free on Board
Free on Board (FOB) is an Incoterm used in ocean freight to define when responsibility shifts from the seller to the buyer. Under FOB, the seller delivers the goods onto the vessel at the named port of shipment. Once the cargo is physically loaded on board, the risk transfers to the buyer. From that moment, the buyer is responsible for freight, insurance, and all costs beyond the loading point.
This term is widely used when buyers prefer to control the main carriage. The seller handles export customs clearance and ensures the goods reach the vessel safely. After loading, the buyer manages ocean freight booking, transit risks, and onwards logistics. This clear split helps both sides understand their obligations. It also prevents confusion about who handles costs at each stage.
FOB is best suited for bulk and non-containerized cargo because it aligns closely with port loading processes. However, it is often used in container shipping as well, even though other Incoterms may be more precise. Regardless, FOB provides a simple and predictable structure for sellers and buyers. It encourages straightforward coordination at the port.
Overall, FOB offers transparency in cost allocation and risk transfer during international trade. It gives buyers more control over shipping arrangements while giving sellers a clear endpoint for their obligation. When both parties follow it correctly, FOB keeps responsibilities well-defined and reduces potential disputes.
Frequently Asked Questions about Free on Board
Clear answers to the most common questions people have when learning about Free on Board.
Risk shifts from seller to buyer the moment the goods are loaded onto the vessel at the agreed port, before the ship departs.
The seller covers export clearance, inland transport to the port, and loading charges. After loading, all costs belong to the buyer.
It is commonly used but technically better suited for non-containerized goods. Some experts prefer FCA for containers due to earlier terminal handling.