Free on Board (FOB)

FOB (Free on Board) is an Incoterms 2020 sea rule: the seller clears export and loads the goods on board, then cost and risk pass to the buyer. Delivery happens on the vessel at the named port of shipment. The buyer books and pays the ocean freight, insures the cargo if it wants to, and handles everything at destination. "FOB Shanghai" means the supplier's price covers the goods, export clearance and loading, and nothing after the ship.

Who does what under FOB

Why most Asia-to-US importers buy FOB

FOB is the term on most supplier quotes from China, India, Vietnam and Bangladesh, and most US importers prefer it for practical reasons:

• You control the ocean leg. Your NVOCC books the carrier, the sailing and the routing, and the bill of lading is issued to you, so cargo release at destination does not depend on the seller
• Destination charges are on your contract. Terminal handling, chassis and drayage are billed on rates you agreed, not on the seller's forwarder's tariff
• The ISF comes from your own forwarder. The Importer Security Filing is the buyer's responsibility either way; when you book the freight, the party filing it is the one that also holds the booking
• Supplier prices compare like for like. An FOB price is the goods and the export handling; freight and insurance are priced separately and visibly, which also makes the customs value straightforward

The supplier, for its part, keeps the export side it knows: the local trucking, the export declaration in its own country and the port charges up to the ship. Against CIF, the difference is who buys the freight and the insurance, not where risk passes; the FOB vs CIF comparison lays it out. That is why FOB rather than EXW is the usual buyer-controlled term on the China to USA, India to USA and Vietnam to USA lanes.

FOB vs FCA for containerized cargo

FOB was written around cargo the seller can watch being loaded. A container is handed to the carrier at the terminal gate, often days before the vessel arrives, yet under FOB the seller carries the risk until the box is on board, over a period when it has no control of the cargo.

The ICC's guidance is that when goods are containerized and handed over at a terminal, FOB and the other sea rules are a poor fit, and that FCA (Free Carrier) is the rule that fits: delivery, and risk, pass when the container is handed to the buyer's nominated carrier at the named place, which can be the seller's premises or the container terminal.

FOB survives on containers because of the letter of credit. Banks ask for an on-board bill of lading, which an FCA seller could not always get. Incoterms 2020 addressed this by letting the parties agree under FCA that the buyer will instruct the carrier to issue an on-board bill of lading to the seller. In practice FOB remains the market convention in Asian export contracts, so expect to negotiate rather than assume FCA. The Incoterms explainer sets the two rules side by side.

"FOB" in US domestic shipping means something else

Inside the United States, "FOB" on a purchase order usually refers to the Uniform Commercial Code, not to Incoterms. Under UCC 2-319, "F.O.B. the place of shipment" means the seller's risk and expense end when the goods are put into the carrier's possession, and "F.O.B. the place of destination" means the seller carries them to the named place at its own risk. Those are the "FOB origin" and "FOB destination" terms on US trucking paperwork, and they say nothing about vessels. If a quote mixes the two systems, ask which one is meant and write the edition in full: "FOB Ningbo, Incoterms 2020".

"FOB airport" is a similar leftover. Older editions of the Incoterms rules had mode-specific free-carrier terms, including one for air; the 1990 revision folded them into the single FCA rule. For air freight, quote FCA with the named airport or handover point.

FOB and your US customs value

US customs value is the price actually paid or payable to the seller, exclusive of international freight and insurance (19 CFR 152.102(f)). An FOB invoice is already on that basis, so there is normally nothing to deduct: the ocean freight and insurance you buy from your own forwarder are not payments to the seller. What can still be added under 19 CFR 152.103(b) are packing costs you bore, selling commissions, assists such as tooling or molds you supplied, royalties tied to the goods, and any resale proceeds that go back to the seller. Duty, including any Section 301, Section 232 or IEEPA layers, is then calculated on that value; estimate it in the tariff simulator.

Booking FOB cargo with Airlift

Airlift is an FMC-licensed NVOCC (OTI license 016162) with its own offices in Los Angeles, New Jersey, Chennai, Ho Chi Minh City, Dhaka and Phnom Penh. Give us the supplier's FOB port and cargo-ready date, and we book the ocean freight, issue the house bill of lading to you, file the ISF, coordinate the entry through our licensed customs-broker network (customs clearance) and arrange delivery from the port. Price the ocean leg in rate search, and add cargo insurance if you want the voyage covered: FOB does not require either party to insure.