Seller loads goods onto the named vessel — the world's most widely used sea freight Incoterm.
Free on Board (FOB) requires the seller to deliver the goods on board the nominated vessel at the named port of shipment. Risk transfers from seller to buyer when the goods are on board the vessel. The buyer is responsible for nominating the vessel, paying ocean freight, arranging cargo insurance, handling import customs clearance, and managing delivery at the destination. FOB is the most frequently cited Incoterm in international trade, particularly for manufactured goods exported from Asia. However, ICC recommends using FCA instead of FOB for containerised freight, since containers are handed to carriers at inland depots well before loading onto the vessel.
FOB is appropriate for bulk cargo, break-bulk cargo, and non-containerised sea freight where the seller genuinely loads goods onto a vessel at the port. It is widely used in commodity trades (cotton, coffee, metals) and in manufacturing export contracts (particularly from China and Southeast Asia). FOB gives the buyer control over carrier selection and ocean freight costs while the seller handles export logistics.
FOB should not be used for containerised freight. Under containerised trade, the seller delivers to an inland container depot (CFS or CY), not to the vessel. Using FOB creates ambiguity about when risk transfers. ICC and most trade lawyers recommend FCA for containerised shipments. FOB is also not appropriate for courier, air freight, or multimodal shipments.
Modern containerised cargo is handed to the shipping line at an inland container depot (CFS or CY) days before vessel loading. The concept of risk transferring 'on board the vessel' is therefore out of step with how containers actually move. During the gap between depot handover and vessel loading, neither party clearly bears the risk under FOB. FCA at the container depot correctly captures risk transfer at the point of actual handover to the carrier.
Under FOB, the buyer nominates the vessel and pays ocean freight. Under CFR, the seller pays ocean freight to the destination port. In both cases, risk transfers to the buyer when goods are on board at the export port. CFR simply moves the freight payment obligation from buyer to seller.
CIF adds cargo insurance to CFR — the seller pays freight AND minimum cargo insurance. Under FOB, the buyer is responsible for both freight and insurance. Under CIF, the seller arranges freight and insurance; under FOB, the buyer arranges both.
The named port of shipment is the export port where the seller loads goods onto the vessel. For example: FOB Shanghai, FOB Lisbon, FOB Rotterdam. The named port determines which country's export formalities apply, where stevedoring costs are incurred, and where risk transfers.
The seller handles export customs clearance under FOB. As the exporter of record, the seller files the export declaration, obtains any required export licences, and pays export duties if applicable. This is consistent across all F-terms (FAS, FCA, FOB).
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