Incoterm FOB (Free on Board): the golden rule of sea freight
The FOB Incoterm (Free on Board) is, without a doubt, one of the most popular and widely used Incoterms in global sea transport. Under FOB, the seller fulfils their delivery obligation when the goods are loaded on board the vessel at the agreed port of shipment.
It is a term used exclusively for sea freight and is the preferred option for many importers as it allows them greater control over the main transport.
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How FOB works: the key moment of loading
The transfer of risk and costs occurs at the exact moment the goods cross the ship's rail, literally.
Practical example:
Purchase under FOB Shanghai
You order a batch of electronic products from a supplier in China under Incoterm FOB (Port of Shanghai).
Transport at origin
The Chinese supplier organises and pays for the transport from their factory to the Port of Shanghai.
Loading on board
<span class="font-semibold">The supplier also handles the loading</span> of the goods onto the vessel.
Transfer of Risk
The moment your cargo is lifted by the crane and placed on board the vessel, the risk of any damage or loss passes from the supplier to you.
Responsibilities under Incoterm FOB
Seller's responsibility (maximum until on board):
- Packing and preparing the goods.
- Arranging and paying for land transport at origin.
- Arranging and paying for export customs clearance.
- Loading the goods on board the vessel.
- Assuming risk until the goods are on board.
Your Responsibility as a buyer:
- Assuming the risk from the moment the goods are on board the vessel.
- Arranging and paying for the main carriage (sea freight).
- Arranging and paying for insurance.
- Arranging and paying for import customs clearance.
- Paying for transport at the destination.
FOB vs. CIF: Which one to choose?
The difference between FOB and CIF is substantial, and you should be aware of these differences before choosing one over the other:
Freight control
FOB
As the buyer, you have total control over the hiring of sea freight. This allows you to negotiate rates and choose your preferred shipping line.
CIF
The seller is responsible for arranging and paying for the freight and insurance. You have less control over the transport.
Final cost
FOB
Greater control over costs, possibility to optimise rates.
CIF
The final cost can often be higher because the seller adds a margin.
Recommended for
FOB
Experienced importers with a trusted freight forwarder.
CIF
Importers who prefer to delegate freight to their supplier.
If you are an experienced importer with a trusted freight forwarder, FOB is an excellent option for optimising costs and having more control. If you prefer to delegate the freight to your supplier, CIF might be a better choice.
Frequently Asked Questions
01.Who chooses the shipping line?
Under FOB, the shipping line is always designated by the buyer.
02.Origin costs?
The seller bears all costs until the goods are on board the vessel: inland transport at origin, export customs clearance and loading on board.
03.Risk transfer?
Risk passes from the seller to the buyer the moment the goods are on board the vessel. FOB is an exclusively maritime rule.
Other Incoterms
EXWEx Works
The least responsibility for the seller. The goods are delivered at their warehouse or factory. The buyer assumes all costs and risks from that point.
FCAFree Carrier
The seller delivers the goods to the carrier designated by the buyer.
CIPCarriage and Insurance Paid To
The seller pays for transport and insurance to the agreed destination.
DPUDelivered at Place Unloaded
The seller assumes all costs and risks until the goods are delivered and unloaded at the agreed destination (e.g., a terminal or warehouse).
DAPDelivered At Place
The seller delivers when the goods are made available at the agreed place.
FASFree Alongside Ship
The seller delivers the goods to the carrier designated by the buyer.
CIFCost, Insurance and Freight
The seller pays the cost, insurance and freight to the destination port.