FOB
Free On Board . . . (named port of shipment)                                                                                       < Go Back

FOB, Free On Board (...named port of shipment)

In Free On Board, the seller/exporter/manufacturer clears the goods for export and is responsible for the costs and risks of delivering the goods past the ship's rail at the named port of shipment.

The Free On Board term is used only for ocean or inland waterway transport.

The "named place" in Free On Board and all "F" terms is domestic to the seller.

Normal payment terms for Free On Board transactions include cash in advance, open account, and letters of credit.

The Free On Board term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore where passing the ship's rail is important. However, it is also commonly used in shipping container loads of other goods.

The key document in FOB transactions is the "On Board Bill of Lading."

Sellers and buyers often confuse the Free On Board term with Free Carrier. Free On Board (FOB) does not mean loading the goods onto a truck at the seller's place of business. Free On Board is used only in reference to delivering the goods past a ship's rail in ocean or inland waterway transport. Free Carrier, on the other hand, is applicable to all modes of transport.

Examples

FOB Free on Board "Vessel ABC" Buenos Aires Argentina
FOB Free on Board Gdansk Poland

Incoterm Category

FOB is an "F" Incoterm where the seller/exporter is responsible for delivering the goods, export cleared, on board a ship, and does not bear risk or costs afterwards.

Modes of Transport Covered

Used only for ocean or inland waterway transport.

Seller's Responsibilities (summary)

1. Goods-Provide the goods, commercial invoice or electronic message, and other documentation as required by the sales contract.
2. Licenses and Customs Formalities-Obtain at own risk and cost any export licenses and authorizations and carry out all export formalities and procedures.
3. Carriage and Insurance-The seller has no obligation to the buyer to provide carriage of goods or insurance.
4. Delivery-Deliver the goods on board the named vessel at the named port and place and at the time stipulated in the sales contract.
5. Risk Transfer-Assume all risks of loss or damage to the goods until they have passed the ship's rail on the named vessel as provided in the sales contract.
6. Costs-Pay all costs until the goods have passed the ship's rail on the named vessel as well as all costs relating to export including duties, taxes and customs formalities.
7. Notice to the Buyer-Provide sufficient notice to the buyer that the goods have been delivered on board the named vessel.
8. Proof of Delivery, Transport Documents-Provide the buyer with a proof of delivery or a transport document, or to assist the buyer in obtaining a transport document.
9. Checking, Packing, Marking-Pay all costs associated with checking the quality and quantity of the goods to be in conformity with the sales contract. Provide appropriate packing (unless the goods are traditionally delivered unpackaged) as required for the transport of the goods, to the extent that the buyer has made transport circumstances known to the seller prior to the execution of the sales contract. Provide marking appropriate to the packaging.
10. Other-Provide the buyer at the buyer's request, risk and expense any and all assistance in securing documentation originating in the country of export or of origin required for import and transshipment through another country. Provide the buyer at the buyer's request information necessary to obtain insurance.

Buyer's Responsibilities (summary)

1. Payment-Pay for the goods as provided in the sales contract.
2. Licenses and Customs Formalities-Obtain at own risk and cost any import licenses and authorizations and carry out all import formalities.
3. Carriage and Insurance-Provide for contract of carriage from the named port of shipment. No obligation for insurance.
4. Taking Delivery-Take delivery of the goods as provided in the sales contract.
5. Risk Transfer-Assume all risks of loss or damage from the time the goods have passed the ship's rail at the port of shipment.
6. Costs-Pay all costs for carriage and insurance from the time the goods have passed the ship's rail at the port of shipment in accordance with the terms of the sales contract. Pay all costs resulting from failure of the named ship to arrive on time or to be able to take the goods. Pay all costs relating to import formalities including duties, taxes and other charges including transshipment.
7. Notice to Seller-Give sufficient notice to the seller of the name of the vessel, the time or period for delivery and the place of delivery.
8. Proof of Delivery, Transport Document-Accept the seller's proof of delivery or transport document.
9. Inspection(s)-Pay for the costs of pre-shipment inspection except inspections required by the country of export.
10. Other-Pay all costs associated with securing documentation originating in the country of origin or export as required for import. Reimburse seller for seller's costs in providing such documentation or assistance.