Incoterms 2020 · Risk passes on board
FOB — Free On Board
The seller delivers the goods on board the buyer's vessel at the named port; the buyer pays the main carriage.
Key facts
| Risk passes | When the goods are on board the vessel at the named port |
|---|---|
| Export clearance | Seller |
| Import clearance and duty | Buyer |
| Main carriage | Buyer |
| Insurance | Neither party is obliged |
| Loading | Seller bears the cost and risk of loading on board |
| Best for | Sea freight where the buyer controls the vessel or forwarder |
| Source | ICC Incoterms 2020, FOB |
FOB is not a container rule
The letters say free on board, but a container is usually handed to the carrier at a terminal days before it is loaded. The risk point in FOB is on board, which the seller cannot observe or control at a terminal. For containers, FCA at the terminal is the cleaner rule.
Many trade finance documents still ask for an on-board bill of lading. FCA 2020 includes an optional on-board bill mechanism for that reason; use it instead of forcing FOB onto a container shipment.
FOB and the export declaration
The seller clears export under FOB, so the seller needs the export documents and a local tax identity. The buyer arranges the vessel and the main carriage. If the buyer's vessel arrives late, storage and demurrage can accrue before risk passes; the contract should allocate those charges.
For landed cost, FOB is goods plus origin charges plus loading. Freight, insurance, duty and import tax are added by the buyer.
Frequently asked questions
When does risk pass under FOB?
When the goods are on board the vessel at the named port, not when they reach the destination.
Is FOB suitable for air freight?
No. FOB is a sea and inland waterway rule. Use FCA for air and multi-modal shipments.
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