GLOSSARY
FOB (Free on Board)
An Incoterms 2020 sea-and-inland-waterway rule where the seller delivers goods on board the vessel nominated by the buyer at the named port of shipment.
Free on Board (FOB) is an Incoterms 2020 rule limited to sea and inland-waterway transport. The seller delivers goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers from seller to buyer once the goods are on board.
Why it matters
FOB is one of the oldest and most familiar Incoterms, but it is frequently misused for containerized cargo. The ICC explicitly recommends FCA over FOB whenever goods are handed to the carrier before vessel loading, which is the norm in container shipping. Under FOB, the seller bears risk during terminal handling and pre-loading operations they no longer control once the container leaves their facility.
The seller is responsible for export clearance and delivering the goods to the ship. The buyer pays freight, insurance (optional), import clearance, and onward carriage. For cost-and-freight pricing, see CFR; for cost, insurance, and freight, see CIF.
Related terms
- FCA (Free Carrier)
- CFR (Cost and Freight)
- CIF (Cost, Insurance and Freight)
- Incoterms
- Bill of lading