FOB (Free On Board) (FOB)

Definition

Free On Board is an Incoterm for sea and inland waterway transport. Under FOB, the seller delivers the goods on board the vessel at the named port of shipment, and risk transfers to the buyer at that point. The buyer arranges and pays for ocean carriage onward.

Why it matters

FOB is one of the most common terms in ocean import. It determines that the buyer (importer) controls and pays for the main carriage, which is the leg a freight forwarder typically manages.

What FOB means operationally for the freight forwarder

On a FOB shipment, the importer (buyer) typically hires the freight forwarder to arrange the main ocean carriage from the port of loading to the destination port. The forwarder books the vessel space, coordinates with the origin agent, and manages the documentation for the ocean leg. The seller is responsible for getting the cargo to the port and onto the vessel. Once the goods are on board, the buyer's insurance and risk take over. This is why the forwarder's commercial invoice to the importer covers the ocean freight and destination charges.

FOB port designation and why it matters

FOB must name a specific port of shipment, for example FOB Shanghai or FOB Shenzhen. The named port determines where the seller's obligation ends and the buyer's begins. If a seller quotes FOB and ships from a different port than named, the buyer's cost basis is wrong. Forwarders see this most often when goods are manufactured inland but shipped from a coastal port, or when a manufacturer uses a consolidation point the buyer was not told about. The port on the commercial invoice and the port on the bill of lading should match. When they do not, it creates a valuation question for the customs entry.

FOB vs FCA for container shipments

FOB is technically intended for bulk and break-bulk cargo loaded directly onto a vessel. For containerized shipments, FCA (Free Carrier) is the more precise term because the seller delivers the cargo to the carrier (typically at a CFS or container yard) before it is loaded aboard the vessel. However, FOB remains the most commonly used term in practice for containerized ocean shipments, and most parties treat it as meaning 'seller loads container at origin port, buyer arranges the rest.' Freight forwarders work with whatever term is on the commercial invoice, but awareness of the FCA alternative matters when advising importers on trade terms.