FOB (Free on Board)
Maritime Incoterm whereby the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. Risk passes when goods are placed on board.
Definition and Principle
FOB (Free on Board) is one of the oldest and most widely used Incoterms. It is exclusively for sea or inland waterway transport. The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment and clears them for export.
Transfer of Risks
Risk passes from seller to buyer when the goods are placed on board the vessel. This was an important change introduced by Incoterms 2010: the "ship's rail" rule from previous versions was replaced by the concept of delivery on board.
Allocation of Obligations
Seller:
- Deliver the goods on board the vessel at the named port
- Clear the goods for export
- Pay loading costs on board (unless port practice dictates otherwise)
Buyer:
- Nominate the vessel and port of shipment
- Contract and pay for sea freight
- Procure insurance (recommended)
- Clear the goods for import
FOB and Containerised Transport
The ICC advises against using FOB for containerised transport, as delivery at the container terminal (before goods are placed on board) creates an uncovered risk zone. For containers, FCA is preferable. FOB remains perfectly suited for bulk cargo, conventional goods and heavy lifts.