FOB (Free on Board) is one of the four sea-and-inland-waterway-only Incoterms and one of the most widely used trade terms in the world. The seller delivers when the goods are on board the vessel at the named port of shipment, cleared for export. Risk and cost transfer to the buyer at that point.
Under FOB, the seller must:
- Deliver the goods on board the vessel at the named port on the agreed date
- Handle export clearance
- Pay loading charges (typically included in the "on-board" delivery obligation)
- Provide proof of delivery — typically an on-board bill of lading
Under FOB, the buyer must:
- Contract and pay for ocean carriage and any subsequent transport
- Bear the risk of loss from the moment the goods are on board the vessel
- Arrange cargo insurance (FOB does not require seller insurance)
- Handle import clearance and pay duties at destination
Important pitfall — container cargo. FOB was originally designed for break-bulk cargo loaded by ship's tackle, where "on board the vessel" had a clear meaning. For containers, "on board" is operationally fuzzy: containers are usually delivered to the terminal hours or days before loading, where they sit in the terminal yard at the seller's risk under FOB. The ICC explicitly recommends FCA instead of FOB for containers — but commercial practice has been slow to follow.
For U.S. customs valuation, FOB-named-foreign-port prices are commonly used as a starting point for transaction value. Buyers must add international freight, marine insurance, and other dutiable charges to arrive at the CIF-equivalent value used for duty calculation.