FOB (Free on Board)
Definition
FOB is an Incoterm for sea freight under which the seller delivers goods loaded on board the vessel at the origin port, at which point cost and risk transfer to the buyer. The buyer pays for ocean freight, insurance, and everything after loading.
In Practice
Under FOB, the seller handles inland transport to the port, export clearance, and loading. Once the goods are on board, the buyer owns the shipment: ocean freight, marine insurance, destination charges, import clearance, and final delivery. Risk of loss transfers at the ship's rail, so damage during the voyage is the buyer's problem to insure.
FOB matters to planners because it is the most common term for import programs where the buyer wants control. You nominate the carrier or forwarder, choose sailing schedules, and see container-level status, which makes transit times and landed costs far easier to manage than under seller-controlled terms.
For example, an importer buying FOB Shanghai instructs its forwarder to book a specific weekly service, letting it plan warehouse receiving around a known 28-day transit rather than waiting on the supplier's booking choices.
Related Calculators
Related Terms
Incoterms are standardized international trade terms published by the International Chamber of Commerce that define where responsibility, cost, and risk transfer from seller to buyer in a shipment. Common examples include EXW, FOB, CIF, and DDP.
CIF (Cost, Insurance and Freight)CIF is an Incoterm for sea freight under which the seller pays for ocean freight and minimum insurance to the destination port, but risk transfers to the buyer once goods are loaded at origin. The buyer handles import clearance and delivery from the port.
Ocean FreightOcean freight is the transport of goods by sea, typically in standardized containers aboard container ships. It is the dominant mode for international trade, offering the lowest cost per unit at the price of long transit times.
Bill of LadingA bill of lading is the legal document issued by a carrier that serves as a receipt for goods, evidence of the transport contract, and in ocean shipping, a document of title to the cargo. It travels with, and controls, the shipment.