Incoterms
What is FOB?
FOB (Free on Board) is one of the most widely used Incoterms. Learn its meaning, risk transfer, pricing practice, and FAQs.
Under FOB, the seller delivers when goods pass the ship's rail at the named port of shipment; risk transfers to the buyer at that point.
Meaning and When to Use FOB
FOB (Free on Board) is one of the most widely used Incoterms® 2020 rules for export pricing. The seller delivers when goods are on board the vessel at the named port of shipment, bearing all costs and risks to that point.
FOB applies to sea and inland waterway transport. It is common for quotes from Shenzhen, Shanghai, Ningbo, or Qingdao to buyers in Europe, North America, and Southeast Asia. Always name the port — e.g. "FOB Shenzhen".
Compared with EXW, the seller under FOB handles more local logistics and export formalities. Compared with CIF, FOB excludes main carriage and insurance, which the buyer arranges.
Division of Responsibilities, Risk, and Cost
Under FOB, responsibilities are clearly split:
- Seller: Provide conforming goods and commercial invoice; export clearance where applicable; packaging, inland haulage, export charges; load goods on board at the port of shipment.
- Buyer: Nominate the vessel or carrier; pay main carriage and insurance (unless agreed otherwise); bear loss or damage from loading onward; import clearance and duties.
Risk transfers when goods are on board the vessel. Sellers should document condition before loading; buyers should specify bill of lading requirements and latest shipment date in the contract.
FOB Pricing in Practice
FOB price = product cost + packaging + inland freight + export clearance + local charges up to loading. Quotations should state:
- Incoterm and port (e.g. FOB Ningbo)
- Currency (usually USD or EUR)
- Quantity, specifications, FOB total and/or unit price
- Payment terms and delivery schedule
Use the FOB Calculator for cost build-up, then profit or margin tools to test order viability. For CIF quotes, add freight and insurance on top of FOB.
Documents and Compliance Notes
Typical FOB exports involve commercial invoice, packing list, bill of lading, certificate of origin (if required), and export declaration. Invoice values should match the FOB quote and support buyer clearance.
FOB defines transport and risk allocation — it does not replace product standards, inspection clauses, or sanctions screening. Exports to the US or EU may require additional EAR, REACH, or other compliance checks.
Examples
Example 1 — Electronics FOB Shenzhen
A Shenzhen factory exports 5,000 Bluetooth modules to a buyer in Germany.
- Product cost: USD 28,000
- Packaging + inland to Yantian: USD 1,200
- Export clearance & port charges: USD 380
FOB total = USD 29,580 · Unit price ≈ USD 5.92/pc. Buyer arranges ocean freight and insurance.
Example 2 — Furniture FOB Shanghai
A Foshan furniture supplier ships one 40HQ container to Australia via Shanghai; seller arranges trucking and clearance.
- Goods + packaging: USD 42,000
- Inland + fumigation: USD 980
- Clearance + port fees: USD 520
FOB Shanghai = USD 43,500. Risk passes on loading; buyer pays ocean and destination costs.
FAQ
- What is the difference between FOB and CIF?
- Under FOB the seller delivers goods on board at the port of shipment. Under CIF the seller also pays main carriage freight and marine insurance. The buyer bears destination and import risks under both terms unless the contract states otherwise.
- When does risk transfer to the buyer under FOB?
- Under Incoterms® 2020, risk passes when goods are on board the vessel nominated by the buyer at the named port of shipment. Clarify the loading point and documents in your contract.
- What costs are included in the FOB price?
- Typically product cost, packaging, inland haulage to the port, export clearance, and local charges up to loading. Main ocean freight, insurance, and destination charges are excluded.
- Can FOB be used for air freight?
- FOB applies only to sea and inland waterway transport under Incoterms® 2020. For air exports, FCA (Free Carrier) is commonly used instead.
- How do I calculate an FOB quote?
- Add product cost and all seller-side local charges for the FOB total. Use our FOB Calculator, then divide by quantity for unit price.
Conclusion
FOB is foundational for export quoting. Understanding meaning, risk transfer, and cost build-up is essential for trade professionals. Combine our FOB Calculator, CIF Calculator, and document templates for a complete workflow.