01Obligations under FOB
Seller: Export clearance, loading on board at port of shipment.
Buyer: Main carriage, insurance, import clearance, on-carriage.
The precise split of the 10 obligation pairs (A1–A10 / B1–B10) is binding under the ICC Incoterms 2020 rules.
02Risk and cost transfer
Risk transfer: When goods cross the ship's rail / are loaded on board.
Cost transfer: Seller up to on-board loading, buyer thereafter.
For several Incoterms, the risk and cost points do not coincide — this is the biggest source of misunderstanding in international trade. Cargo insurance should always be aligned with the risk transfer point, not the cost transfer point.
03When to use FOB
Historically the most common sea Incoterm, but problematic for containers today — the seller has no control between terminal drop-off and on-board loading. Use FCA for containers; FOB remains sensible for bulk cargo.
Before choosing, verify: Can both parties operationally handle customs, carriage and insurance in the respective country? Are there tax implications (e.g. VAT under DDP)? Which documents (commercial invoice, certificate of origin, B/L, CMR, AWB) are required?
04Common pitfalls
1) Mode mismatch: FOB is only for sea / inland waterway — do not use for containers in multimodal transport.
2) On-board notation: For sea Incoterms, a correct on-board notation on the B/L is critical for letter-of-credit settlement.
3) Insurance cover: Explicitly agree ICC A / B / C and the sum insured.
Preguntas frecuentes
What does FOB mean in practice?
Seller delivers goods loaded on board the vessel at port of shipment. Applicable to sea and inland waterway only. Risk transfer: When goods cross the ship's rail / are loaded on board.
Who pays cargo insurance under FOB?
No mandatory insurance. The buyer bears the risk from the transfer point onwards and should insure accordingly.
Is FOB suitable for containers?
Not ideal. For containers, the ICC recommends the multimodal terms FCA (instead of FOB), CPT (instead of CFR) or CIP (instead of CIF).