FOB Shipping

FOB stands for Free On Board. Under the international Incoterms rule, shipping risk passes from seller to buyer when the goods are loaded on board the nominated vessel at the named port of shipment.

That distinction matters when something goes wrong. If cargo is damaged, the sales contract, the applicable delivery rule, and insurance cover help determine who bears the loss. Risk and ownership are not the same thing: Incoterms allocate delivery obligations, costs, and risk, but the sales contract and applicable law determine when title passes.

What FOB actually means

A quote such as FOB Ningbo, Incoterms 2020 names a shipment port and the rules being used. The supplier handles export clearance and delivery on board. The buyer normally arranges and pays for the main carriage and import formalities.

ICC FOB names a port of shipment, not a destination. Domestic US contracts may separately use “FOB place of shipment” or “FOB place of destination.” Those terms should not be treated as the international maritime rule. State the intended rule and named place in the contract rather than assuming “FOB” alone settles everything.

For containerized cargo handed to a carrier or terminal before vessel loading, FCA (Free Carrier) is generally the more suitable rule. The handover point and who can control the loading matter.

Why FOB pricing looks cheaper than it is

A FOB quote generally includes the goods and the seller's costs of getting them on board. It does not include the buyer's main-carriage and import-side costs, such as:

• Ocean freight
• Marine insurance arranged by the buyer
• Import duties and tariffs
• Customs brokerage fees
• Destination-port handling charges allocated to the buyer
• Trucking from the destination port to a warehouse or Amazon

A FOB price and a delivered price cover different parts of the journey. Ask for the landed cost per unit before comparing supplier quotes.

FOB vs the other terms you'll see

EXW (Ex Works) places much of the transport work on the buyer. Risk generally transfers when the goods are placed at the buyer's disposal at the named place, not when ownership happens to transfer. Loading and export clearance can be difficult for an overseas buyer, so check whether FCA is a better fit.

CIF (Cost, Insurance, and Freight) separates cost from risk. The seller pays freight and the required insurance to the named destination port, but risk still transfers when the goods are on board at the origin port. Paying for the ocean leg does not mean the seller retains shipping risk throughout it. Check the insurance cover and destination charges rather than assuming a CIF quote covers every possible cost.

FOB gives the buyer responsibility for arranging the main carriage after the seller delivers on board. Choose the rule that matches the actual handover and the parties' responsibilities, not just the cheapest-looking quote.

What to nail down before you agree to FOB

• The named port and rules edition. Specify the port of shipment and “Incoterms 2020.”
• Who books the vessel. Confirm the buyer's carrier nomination and the supplier's delivery arrangements in writing.
• When risk transfers. Under ICC FOB, loading on board is different from handing a container to a terminal earlier in the journey.
• Insurance. FOB does not require either party to buy insurance. Arrange appropriate cover for the risk you will bear; do not assume the supplier has covered your part of the journey.
• Ownership and payment. Address those separately in the sales contract.

References: ICC Incoterms 2020 and California Commercial Code §2319 for the distinct domestic FOB terminology.