What is FOB (Free On Board)?
Free On Board (FOB) is a sea and inland waterway Incoterms rule under which the seller delivers when the goods are placed on board the vessel nominated by the buyer at the named port of shipment. Risk passes at that point.
At a glance
| Term | FOB |
|---|---|
| Definition | Free On Board — seller delivers when goods cross the ship's rail at the named origin port. |
| Category | Logistics & delivery |
| Related terms | Incoterms, EXW (Ex Works), CIF, DDP, B/L (Bill of Lading), Laycan, Demurrage |
What it is used for
FOB is the standard rule for bulk commodity cargoes where the buyer charters the vessel — dry bulk, oil and grain trades routinely quote FOB load port. The buyer controls freight and can optimise shipping cost.
Key points
- The seller clears the goods for export and bears cost and risk until they are on board.
- The buyer nominates the vessel, contracts and pays for carriage, and insures the voyage.
- Risk transfers on board at the load port, not on arrival.
- Sea and inland waterway transport only.
What to watch for
- Do not use FOB for containers — the goods are handed to the carrier at a terminal long before loading. Use FCA.
- The parties must coordinate closely on laycan and vessel nomination, since the seller's delivery depends on the buyer's ship arriving.
- Demurrage and laytime terms should be agreed in the contract; the Incoterms rule does not cover them.
Frequently asked questions
Who pays freight under FOB?
The buyer. The seller's cost ends once the goods are on board at the load port.
Who insures the cargo under FOB?
Neither party is obliged to insure, but since risk passes on board, the buyer normally insures the voyage.
What is the difference between FOB and CIF?
Under CIF the seller arranges and pays carriage and insurance to the destination port, though risk still passes on board at the load port.
Related terms
Lodfy verifies every company on the platform — registration, ownership and sanctions screening — before they can trade.