FOB (Free on Board) is one of the most widely used Incoterms in international trade, especially for sea or inland waterway transport. It defines the precise moment and location where the risk and responsibility for the goods shift from the seller to the buyer. Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. From that point onward, the buyer assumes all risks, responsibilities, and costs associated with transportation, including freight, insurance, unloading, and further delivery to the final destination.
This Incoterm is particularly suitable for bulk cargo, non-containerized shipments, and conventional sea freight operations, where clear division of duties is essential. FOB provides both parties with a transparent framework for cost allocation, including freight costs, and liability, helping to prevent disputes and streamline international trade transactions.
FOB stands for Free on Board and is used exclusively for sea and inland waterway transport. According to the International Chamber of Commerce (ICC), FOB means that the seller fulfills their delivery obligation once the goods are loaded on the shipping vessel chosen by the buyer at the agreed port of departure. This rule is defined in the Incoterms 2020.
The buyer assumes responsibility once the cargo passes the ship’s rail. Any costs related to freight, insurance, unloading, and further inland transportation fall on the buyer. In practice, this means that once the cargo is physically onboard the ship, any damage, loss, or additional charges become the buyer's responsibility, even if the vessel has not yet departed.
Under FOB terms, the seller is responsible for all activities and costs up to the point where goods are loaded on the vessel. The buyer handles everything beyond that point. Here's a breakdown:
Delivery point: On board the vessel at the port of shipment
Mode of transport: Only applicable to sea and inland waterways
Risk transfer: When the goods are on board
Costs division: Seller covers all costs until loading; buyer covers all after
The fob shipping point must be clearly named in the contract, e.g., "FOB Hamburg". This level of specificity ensures that both parties understand exactly when and where responsibilities change hands, which is crucial for managing transit risks and delivery schedules, particularly regarding shipping costs . It is also common practice for sellers to obtain loading confirmation documentation from port authorities or the shipping company to provide legal proof of delivery.
Delivery of goods and documents: Provide goods that match the contract and issue a commercial invoice.
Licenses and formalities: Obtain any required export licenses and handle export formalities.
Transport to port: Arrange and pay for transport to the port of shipment.
Loading on vessel: Cover costs and responsibilities related to loading goods on board.
Notification: Inform the buyer that the goods have been delivered on board.
Proof of goods transfers: Provide documentation confirming goods have been loaded.
Nominate the vessel: Choose the vessel and inform the seller in advance.
Main carriage: Pay for sea freight from the port of shipment to the destination.
Insurance (optional): Arrange insurance if desired.
Import formalities: Handle import duties, customs clearance, and taxes.
Unloading and inland transport: Organize unloading and final delivery.
Risk assumption: Bear the risk from the moment goods are on board.
Choosing FOB shipping terms offers a range of benefits for businesses engaged in international trade. It provides a clear structure for dividing costs and responsibilities, making it a popular choice for experienced importers who prefer to manage their own logistics chain.
Clear risk and cost division: FOB clearly outlines the point at which the risk and costs transfer from the seller to the buyer. This eliminates confusion and reduces potential disputes, as each party knows their exact responsibilities in the shipping process.
Buyer control over main carriage: The buyer is free to select the shipping line, negotiate freight rates, determine the route, and manage scheduling. This level of control can lead to more efficient logistics planning and better cost management.
Competitive freight rates: By handling the main carriage, the buyer can choose carriers with the best rates and service options. This can result in significant cost savings, particularly considering both shipping and insurance costs while shipping high volumes.
Flexibility: FOB terms offer flexibility in managing shipping operations, especially for buyers with experience and established logistics partnerships. Buyers can align shipping with their own warehousing, inventory management strategies, and overall transportation costs.
Standardized rule: As part of the globally recognized Incoterms 2020, FOB is widely accepted and understood by freight forwarders, carriers, customs brokers, and insurers. This standardization reduces miscommunication and simplifies cross-border transactions.
Transparency and traceability: Since buyers arrange the main transportation, they often benefit from better shipment tracking and real-time logistics visibility, which can be crucial for managing supply chains and meeting customer expectations.
Despite its advantages, FOB shipping also comes with certain challenges, especially for less experienced buyers or in situations where containerized cargo is involved.
Coordination issues: Precise timing is required to ensure the seller can deliver the goods on board the nominated vessel. Any misalignment can lead to delays, storage fees, or demurrage charges.
Documentation disputes: Since the transfer of risk occurs at the point of loading, proper documentation is crucial. Discrepancies in bills of lading or loading confirmations can lead to disagreements between the parties.
Not suitable for containerized cargo: FOB is not ideal for container shipments, as containers are often delivered to terminals before loading on the vessel. In such cases, FCA (Free Carrier) is generally more appropriate.
Early buyer responsibility: Under FOB, the buyer assumes risk as soon as the goods are on board the ship, even if the ship hasn’t departed. This means the buyer could face potential loss or damage during port storage or delays.
Requires strong logistics knowledge: FOB places more responsibility on the buyer to coordinate shipping, insurance, and inland transport. Without sufficient expertise, there’s a higher risk of delays, added costs, or compliance issues.
Understanding how FOB compares to other commonly used Incoterms helps businesses choose the most suitable delivery terms outlined in the sales contract for their trade operations. Below is a detailed comparison with three other frequently used Incoterms: EXW, CIF, and FCA.
EXW puts minimal responsibility on the seller. The buyer is responsible for picking up the goods at the seller’s location and managing the entire logistics process, including export formalities.
FOB, in contrast, requires the seller to deliver goods on board the vessel at the named port and take care of export clearance. This makes FOB a more balanced option for international buyers who do not want to handle local export processes.
FOB is more convenient and manageable for cross-border trade than EXW, especially when the buyer lacks local presence in the seller’s country.
CIF means the seller handles the main carriage and minimum level of cargo insurance to the port of destination. It shifts more responsibility and cost to the seller.
FOB gives buyers complete control over their shipping arrangements and the level of insurance coverage they wish to purchase. This can lead to better terms and flexibility.
CIF is often preferred by new importers who are less familiar with shipping logistics. FOB, however, is suited for experienced buyers who want control over the freight process.
FCA is more versatile and can be used for all modes of transport, not just sea. It is often applied to containerized cargo and multimodal logistics chains.
FOB is strictly limited to sea and inland waterway transport and requires goods to be delivered on board the vessel.
FCA allows for more modern port handling procedures and is logistically easier for container shipments. In contrast, FOB is ideal for traditional bulk or breakbulk cargo loaded directly onto the ship.
AsstrA offers comprehensive support for clients operating under FOB and other Incoterms, ensuring seamless coordination of international shipments from origin to destination. With decades of experience in multimodal logistics and a global network of partners, AsstrA customizes solutions to meet individual customer needs while maintaining full compliance with Incoterms 2020.
Here is how AsstrA supports the transport organization under FOB terms:
Export coordination - AsstrA provides full assistance with preparing and verifying export documentation, obtaining necessary licenses and certificates, and completing export customs procedures on behalf of the seller.
Port services - Expert teams manage port handling operations, including unloading from inland transport, warehousing if needed, and loading the cargo safely on board the vessel nominated by the buyer.
Freight forwarding - For buyers using FOB, AsstrA helps arrange main carriage through a reliable network of international carriers, optimizing routes and transit times to suit shipment requirements.
Insurance support - While FOB terms do not obligate the seller to provide insurance, AsstrA offers cargo insurance solutions to both buyers and sellers, protecting shipments against potential risks.
Visibility & tracking - Real-time shipment monitoring is available through AsstrA’s digital platforms, including GPS-enabled Track & Trace systems, giving both parties full visibility into cargo status and movement.
Advisory services - AsstrA’s logistics consultants help clients assess their shipping needs and recommend the most suitable Incoterm based on cargo type, destination, budget, risk preference, and applicable customs duties.
Coordination with port authorities - AsstrA maintains working relationships with port operators and customs officials, which helps speed up loading processes, reduce wait times, and ensure documentation is correctly processed.
Post-shipment support For buyers, AsstrA can assist with inland transportation, customs clearance at the destination, and delivery to the final address, even if these responsibilities fall outside FOB terms.
With extensive experience in global supply chain management and strategic presence at key ports across Europe, Asia, and the CIS, AsstrA ensures that FOB shipments are executed smoothly, cost-effectively, and with full legal compliance.
FOB Incoterms, or Free On Board, define the point at which the risk transfers from the seller to the buyer during the shipping process. It is a common shipping term used in international trade, especially for sea or inland waterway transport.
In FOB shipping point, the risk transfers to the buyer when the goods are loaded onto the shipping vessel. In FOB destination, the risk transfers only when the goods reach the buyer's location. This distinction significantly impacts how shipping costs and freight costs are calculated.
"Free on board" means the seller delivers the goods to the shipping vessel at a designated port, and from that point, the buyer assumes responsibility for risk and transportation costs.
Under FOB Incoterms, the seller pays for export customs clearance, while the buyer is responsible for import customs clearance and duties at the buyer's location.
In FOB shipping, the buyer assumes risk once the goods are on board the shipping vessel at the shipping point.
Yes, FOB Incoterms are specifically designed for sea or inland waterway transportation and should not be used for air or land transport.
In FOB shipping, the buyer pays for freight costs from the moment the goods are loaded onto the shipping vessel.
FOB price includes the cost of goods plus all expenses incurred by the seller up to loading the goods on the shipping vessel. It does not include freight costs or import duties.
Yes, in FOB destination, the seller delivers the goods all the way to the buyer’s location and is responsible for risk and shipping costs until delivery is completed.
Yes, in FOB destination terms, the seller must deliver goods to the buyer's loading dock or another specified location, taking responsibility for the goods until then.
About AsstrA
AsstrA-Associated Traffic AG is a multinational transportation and logistics service provider headquartered in Zurich, Switzerland. For 30 years, AsstrA has been providing its customers with a full range of global 3PL services via road, rail, air, and sea transportation. The service portfolio includes warehouse logistics, customs clearance, cargo insurance, support for import-export operations, and project logistics.
AsstrA’s team employs more than 1,000 people in countries across Europe, the CIS, Asia, and the USA. The quality of services is confirmed by ISO 9001, ISO 14001, ISO 45001, ISO 22000, ISO 28000, GDP, and SQAS certifications.
AsstrA-Associated Traffic AG is a member of leading trade associations including FIATA, WCA, and TAPA.
