FOB (Free On Board)

FOB is one of the oldest and most widely used trade terms, especially for buyers sourcing goods from overseas factories. Under FOB, the seller is responsible for getting the goods to the named port of shipment, clearing them for export, and loading them on board the vessel that the buyer has nominated. The seller pays for everything up to and including that loading.

The pivotal moment is when the goods are placed on board the vessel. At that instant, both the risk of loss or damage and the responsibility for cost shift to the buyer. From there, the buyer pays the ocean freight, arranges marine insurance if wanted, and handles import customs clearance, duties and import VAT in the destination country.

Because the buyer controls the main sea freight, FOB is popular with importers who want to use their own freight forwarders and negotiate their own shipping rates rather than letting the supplier mark up the freight.

FOB is strictly a maritime rule. It assumes the goods are physically loaded over the side of a ship at a port. That model breaks down for containerised cargo, which is handed to a carrier at a container terminal — sometimes days before the container is actually loaded onto a vessel. Using FOB for containers creates an ambiguous gap: if the container is damaged at the terminal before loading, it is unclear under FOB whether the seller or the buyer bears the loss.

For this reason, the ICC explicitly recommends FCA (Free Carrier) instead of FOB for containers and any multimodal shipment. FCA passes risk cleanly at the terminal handover. Despite this guidance, FOB remains hugely common in practice because of habit and its familiarity in supplier negotiations — but sellers and buyers shipping containers should understand the risk they are taking.