FOB

What is FOB?

FOB stands for Free On Board. It is an Incoterm used for sea and inland waterway transport. Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.

Risk usually transfers from seller to buyer once the goods are on board the vessel.

Why does FOB matter?

FOB matters because it clearly separates responsibilities between seller and buyer in a sea freight transaction.

The seller usually handles export clearance and delivery to the vessel. The buyer usually arranges the main ocean freight, insurance if required, import clearance and onward delivery.

What responsibilities usually sit with each party?

The seller usually manages:

• export packaging

• delivery to the port

• export clearance

• loading onto the vessel

The buyer usually manages:

• ocean freight

• insurance, if required

• import customs clearance

• onward transport

• risk after loading

Common mistakes

Common mistakes include:

• using FOB for the wrong transport mode

• failing to name the port of shipment

• confusing FOB with CIF

• assuming the seller controls the entire shipment

• failing to align the bill of lading with the agreed term

How iTradeDigital helps

iTradeDigital helps buyers and sellers document responsibilities under FOB and connect those responsibilities to the required shipment and trade documents.

Related terms

• Incoterms®

• CIF

• Bill of lading

• Commercial invoice

• Packing list

• Freight forwarder

FAQs

Is FOB used for air freight?

FOB is intended for sea and inland waterway transport, not air freight.

Who pays the freight under FOB?

The buyer usually pays for the main ocean freight.

When does risk transfer under FOB?

Risk usually transfers when the goods are loaded on board the vessel.