FOB (Free on Board) meaning in shipping and import
FOB is the most common term in factory quotes for sea freight, and it is often used where it does not fit.
Definition
FOB (Free on Board)FOB, or Free on Board, is an Incoterms 2020 rule for sea and inland waterway transport under which the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, cleared for export. Risk passes to the buyer once the goods are on board, and the buyer pays for sea freight, insurance, import clearance and delivery.
How FOB works when you import from a factory
An FOB quote includes the product, inland transport to the port, export clearance and loading onto the ship. You book the sea freight, usually through your forwarder, and pay everything from that point: ocean freight, insurance if you want it, destination port charges, customs duty and delivery to your warehouse. Name the port in your purchase order as well.
FOB is popular because it splits the work sensibly. The factory handles what is easiest to do locally, and you control the freight booking, which lets you compare forwarders and consolidate shipments from several suppliers. Always name the port, for example FOB Shenzhen, because inland costs to a different port change the price. Ask the factory to state which charges at origin are included, since terminal and documentation fees are a frequent source of extra invoices.
The catch is containers. With container shipping, goods are handed to the carrier at a terminal, often days before they are loaded onto the vessel. Under FOB the seller still carries the risk until loading, which is a mismatch. ICC guidance points to FCA as the better rule for containerised goods. Many factories still quote FOB from habit, so ask whether FCA is possible.
This is general information based on the ICC Incoterms 2020 rules. FOB prices are converted to landed cost in our calculator and compared during supplier selection in manufacturing support.
Related terms
Incoterms
ICC trade terms that set where delivery happens and how risk and costs split between buyer and seller.
EXW (Ex Works)
The seller makes goods available at its premises; the buyer arranges and pays for the rest.
DDP (Delivered Duty Paid)
The seller delivers to the named destination, cleared for import with duties paid.
Landed cost
The full cost of a product once it reaches your warehouse, including freight, duties and fees.
Frequently asked questions
Does FOB include shipping?
FOB includes transport to the port of shipment and loading on board. It does not include the main sea freight, insurance, import duties or delivery at destination, which the buyer pays.
Can FOB be used for air freight?
No. FOB is a rule for sea and inland waterway transport. For air or containerised shipments, FCA is the rule ICC guidance usually points to.
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