Free On Board (. . . named port of shipment) (FOB)
Incoterms© 2010, enter into force January 1, 2011
One of the 11 Incoterms© 2020.
In Free On Board, the seller/exporter/manufacturer clears the goods for export and delivers them on board the named vessel at the “named port of shipment.”
This is a change from Incoterms 2000, where the seller was responsible only to deliver the goods “past the ship’s rail.”
With FOB, the seller has the option to deliver the goods on board the vessel, or to “procure goods already so delivered.” This is a reference to so-called “string sales,” where a single shipment might be resold multiple times during transport, as is common in the commodity trade.
The named place in FOB is a port and therefore the term is used only for ocean or inland waterway transport. With FOB, the named port of shipment is domestic to the seller.
If the shipment is containerized or to be containerized, common practice is to deliver the shipment to the carrier at a terminal and not on board a ship. In such situations, the FCA term is recommended.
The FOB term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore.
The key document in FOB transactions is the “On Board Bill of Lading.”
The named place in FOB is a port, and therefore the term is used only for ocean or inland waterway transport.
Sellers and buyers often misuse the FOB term. FOB does not mean loading goods onto a truck or train at the seller’s place of business. FOB is used only in reference to delivering the goods on board a ship in ocean or inland waterway transport. The FCA term, on the other hand, is applicable to all modes of transport.
See Incoterms© 2010, World Trade Press Illustrated Guide to Incoterms© 2010 Appendix for details.