GLOSSARY
FOB (Free on Board)
Incoterm for sea/inland-waterway transport only. Seller delivers goods on board the vessel at origin port. Risk and cost transfer to buyer once goods cross the ship's rail.
FOB (Free on Board) is an Incoterms 2020 rule reserved for sea or inland-waterway shipments. The seller's obligation ends once goods are loaded on board the named vessel at the origin port; from that point the buyer carries both the cost and the risk of carriage, insurance, and unloading.
Why it matters
FOB is the reference Incoterm for bulk and break-bulk maritime trade where the seller controls origin handling and the buyer controls the ocean leg. It's also the most-misused Incoterm: containerised shipments handed over at an origin terminal (not at the ship's rail) are properly FCA, not FOB. Customs valuation rules in many jurisdictions treat FOB as the duty base, which is why the distinction has tax consequences.
Related terms
- FCA (multimodal equivalent)
- CIF
- CFR
- Incoterms 2020