Shipping Terms Glossary
Shipping Terms Glossary
Free on Board (FOB)

Free on Board (FOB)

FOB terms are only applicable to ocean freight shipments.

What is Free On Board (FOB)?

FOB is one of the 11 International Commercial Terms ( Incoterms ) used in trade, where the seller is responsible for export clearance, delivery, and loading the goods onto the ship.

🚨 FOB terms are only applicable to ocean freight shipments.

Point of Risk Transfer:

When the seller delivers and unloads the goods onto the ship, the risk of goods getting damaged transfers to the buyer.

What is FOB?

When is it best to use FOB?

FOB works well for shipping bulk or breakbulk goods such as oil, grains, coal, or bagged cement. For containerized cargo, it’s better to use FCA terms.

A quick example:

Simple Scenario Time:

Business Owner (Buyer): Alex is sourcing potatoes from South Africa to the US.

Supplier (Seller): A potato manufacturer in South Africa.

Agreed Term: FOB Port of Cape Town, South Africa.

Seller’s duties: Responsible for export clearance and delivering the goods and loading on to the ship at the Port of Cape Town, South Africa.

Buyer’s duties: Pays the cost of ocean freight, unloading and local transportation costs from the port of import to the final destination in the US.

Point of Risk Transfer: When the seller loads the goods on to the main ship in the Port of Cape Town.

Cost allocation - who should pay what under FOB:

who pays under fob

Rajitha Reniguntla

Rajitha Reniguntla is a supply chain enthusiast from Hong Kong. With a curious mind, she's an avid learner carrying a knack for exploring and breaking down complex ideas. She loves to learn about new things and always aims to enhance the customer experience. Outside of work, she enjoys cycling, doodling and listening to podcasts!

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