ovrseasFOB: Free On Board
F-group rule · sea and inland waterway only · Incoterms® 2020
FOB (Free On Board) means the seller clears the goods for export and delivers them on board the vessel the buyer nominated, at the named port of shipment. Risk passes once the goods are on board; the buyer pays the sea freight and everything at destination, and insures if it wants cover.
- Risk passes
- When the goods are loaded on board the ship.
- Main freight
- Paid by the buyer
- Insurance
- Neither side is obliged to insure — agree who does
- Customs
- Export: Seller · Import: Buyer
Who pays what under FOB
| Export clearance | Seller |
|---|---|
| Carriage to port / terminal | Seller |
| Loading onto main carriage | Seller |
| Main carriage (freight) | Buyer |
| Insurance | Neither obliged |
| Unloading at destination | Buyer |
| Import clearance | Buyer |
| Duties and import taxes | Buyer |
How to write FOB on your documents
The rule is only complete with its named place. The port of shipment — where the goods are loaded on board.
FOB Busan, Korea — Incoterms® 2020
Write it the same way on the quotation, the proforma, the commercial invoice and the shipping instructions — a different place on one document is a different deal.
Use FOB when
- Bulk and break-bulk cargo loaded directly onto the ship.
- The buyer books the vessel and pays the ocean freight.
Think twice when
- Containers: the seller hands the box to the terminal days before loading but keeps the risk until it is on board. FCA puts the risk point where the seller actually lets go.
- Air, road or rail — FOB is for sea and inland waterway transport only. «FOB airport» is a common mistake; the air rule is FCA.
Routinely misused for containers. A container is handed over at a terminal days before loading, so the seller keeps risk they think they have shed.
Questions about FOB
- What does FOB mean in shipping?
- FOB (Free On Board) means the seller clears the goods for export and delivers them on board the vessel the buyer nominated, at the named port of shipment. Risk passes once the goods are on board; the buyer pays the sea freight and everything at destination, and insures if it wants cover.
- Where does risk pass under FOB?
- When the goods are loaded on board the ship.
- Who pays the freight under FOB?
- The buyer pays the main carriage. The seller pays export clearance, carriage to port / terminal, loading onto main carriage.
- Who pays import duties under FOB?
- The buyer. Import clearance, duties and taxes are the buyer’s under every rule except DDP.
- Can FOB be used for containers or air freight?
- FOB is written for sea and inland waterway transport. For containers the goods usually leave the seller at a terminal, so FCA normally fits better; for air it does not apply.
The documents where FOB is written
- Commercial invoice template
Customs and the buyer’s bank read the Incoterm here; it decides which costs belong in the invoice value.
- Proforma invoice template
The buyer opens a letter of credit or pays a deposit on these terms — the same rule must follow through.
- Quotation template
A price means nothing without its rule: «USD 12.50 FOB Busan» and «USD 12.50 DAP Dallas» are different offers.
Compare FOB with
Incoterms® is a registered trademark of the International Chamber of Commerce. This page is an independent summary of how costs and risk are allocated and is not affiliated with or endorsed by ICC. For contract drafting, use the official Incoterms® 2020 rules published by ICC.