Free On Board (FOB) is a commonly used trade term in international trade, meaning that the seller completes delivery once the goods are loaded on board the vessel nominated by the buyer at the designated port of shipment, and the risk transfers to the buyer when the goods are loaded on board. The seller is responsible for export customs clearance and for paying pre-shipment costs (such as inland transportation and terminal handling charges), while the buyer bears the ocean freight, insurance premiums, and the risks after loading on board. FOB applies only to sea or inland waterway transport, not to container transport (for which FCA is usually used instead). Compared with CIF, under FOB the buyer arranges transport and insurance itself, and the seller does not bear freight and insurance costs; compared with CFR, FOB does not include ocean freight. When using FOB, the seller must promptly notify the buyer of the shipment information so that the buyer can arrange insurance; the buyer must nominate the vessel and pay the freight. Common risks include loss of the goods before loading on board and poor coordination between vessel and cargo. In letter of credit settlements, FOB often requires the seller to provide a clean on board bill of lading.
📝 Examples
1. This batch of goods is traded on an FOB basis. The seller is responsible for transporting the goods to the Port of Shanghai and loading them onto the vessel designated by the buyer. All costs and risks thereafter shall be borne by the buyer. (Note: The seller bears the costs and risks before loading, while the buyer bears the ocean freight and insurance.)
2. The contract stipulates pricing on an FOB Ningbo basis. The buyer shall notify the seller of the vessel name and loading date 30 days prior to the shipment period so that the seller can arrange delivery. (Note: The buyer is obligated to designate the vessel and notify the seller; otherwise, additional costs may be incurred.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner