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Glossary · Trade terms
What is FOB (Free on Board)?
An Incoterms rule for sea freight: the seller clears the goods for export and loads them on the ship at the named port, then the buyer takes over.
Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, for example FOB Shenzhen or FOB Ningbo. The seller pays for local trucking, export clearance and loading. Risk passes to the buyer once the goods are on board, and the buyer pays ocean freight, insurance, US import costs and delivery.
FOB is the most common price basis in quotes from Chinese factories, so it is the usual starting point for comparing suppliers. Two FOB quotes are only comparable if they name similar ports and the same packing, and neither includes freight, duties or US fees.
Under Incoterms, FOB is meant for sea and inland waterway transport. It is also different from the “FOB origin” and “FOB destination” terms used in US domestic contracts, so write the full term, such as “FOB Ningbo Incoterms 2020”, in purchase orders to avoid confusion.
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