FOB
FOB (Free On Board) is a maritime-only Incoterm where the seller fulfils their obligation by delivering the goods on board the named vessel at the named load port. From that moment, the buyer is responsible for: freight to destination, insurance, customs at destination, and bears all risk of loss or damage.
FOB is the most common Incoterm in maritime trade, especially for commodities. The named port should be specific (e.g., "FOB Shanghai"). FOB has been increasingly criticised for misuse in containerised trade where the seller actually delivers to the terminal, not the ship — for which FCA (Free Carrier) is more accurate.
FOB is the workhorse of commodity trade — clean and simple, with cost and risk passing together once goods are on board. But it is frequently mis-used in container shipping, where the seller actually hands off at the terminal, not the ship's rail. For containers, FCA (Free Carrier) is the more accurate term.
(on board)
Under FOB Shanghai, once the cargo is loaded on the vessel at Shanghai the buyer owns the risk — a loss at sea is the buyer's problem — and the buyer arranges and pays for the ocean freight and insurance.
Who pays freight under FOB?
The buyer. The seller's responsibility ends once the goods are on board at the origin port; the buyer arranges and pays for main carriage, insurance and destination costs.
When should I use FCA instead of FOB?
For containerised cargo. FOB assumes the seller delivers across the ship's rail, but with containers the seller really hands over at the terminal — FCA (Free Carrier) reflects that correctly.