What is FOB (Free On Board)?
FOB (Free On Board) is an Incoterm used in international shipping that defines when responsibility and risk shift from the seller to the buyer. Under FOB terms, the seller is responsible for delivering the goods to the port of shipment and loading them onto the vessel. Once the goods are loaded, the buyer assumes all responsibility, cost, and risk for the rest of the shipment.
FOB is one of the most widely used Incoterms for ocean freight, especially for shipping from China to the U.S.
FOB Responsibility Breakdown
| Task / Cost | Seller (Exporter) | Buyer (Importer) |
|---|---|---|
| Goods packaging & prep | ✅ Yes | ❌ No |
| Inland transportation to port | ✅ Yes | ❌ No |
| Export customs clearance | ✅ Yes | ❌ No |
| Loading goods onto vessel | ✅ Yes | ❌ No |
| Ocean freight | ❌ No | ✅ Yes |
| Insurance (optional) | ❌ No | ✅ Yes |
| Unloading at destination port | ❌ No | ✅ Yes |
| Import customs & duties | ❌ No | ✅ Yes |
| Final delivery to warehouse | ❌ No | ✅ Yes |
Risk transfers from seller to buyer the moment the goods are loaded on the vessel.
FOB vs EXW vs CIF (Quick Comparison)
| Incoterm | Who Handles Origin Costs? | Who Handles Freight? | Who Handles Import Customs? | Risk Transfer Point |
|---|---|---|---|---|
| EXW | Buyer | Buyer | Buyer | Seller’s warehouse |
| FOB | Seller (to port + loading) | Buyer | Buyer | When loaded onto vessel |
| CIF | Seller | Seller pays freight + insurance | Buyer | When loaded onto vessel |
When FOB Makes Sense
FOB is a good choice when:
✅ The buyer has their own freight forwarder or logistics partner
✅ The buyer wants control over ocean freight cost (avoid factory markup)
✅ The buyer wants to optimize shipping schedules, carriers, or destinations
When FOB Can Be Risky
FOB can cause problems when the seller arranges the truck to port, but:
Miscommunication about loading cut-off times
Port congestion delays
Improper export documents
This is why many importers pair FOB with a trusted freight forwarder (your role).
Real Importer Example (FOB Done Well)
A U.S. importer buys LED desk lamps in Shenzhen under FOB terms.
Chinese factory arranges inland trucking → Shenzhen port.
Factory handles export customs clearance.
Seller loads container onto the vessel.
Buyer’s freight forwarder manages ocean freight, U.S. customs, and delivery.
Result:
Clear division of responsibilities
Lower risk of surprise fees
Buyer controls overall costs
Real Importer Example (FOB Problem Scenario)
Importer did FOB Ningbo, but:
The factory delayed truck booking
Missed the CY cut-off
Container rolled to the next vessel → 7-day delay
Prevention:
Buyer should always request:
These three timings prevent vessel rollovers.
Authoritative Sources
Key Takeaways
FOB is balanced — seller handles export, buyer controls the freight.
Risk transfers when goods are loaded on vessel.
Best for importers who manage their own logistics to reduce cost.
Related Glossary Terms
CIF (Cost, Insurance, Freight)
DDP (Delivered Duty Paid)
FCA (Free Carrier)
Incoterms 2020