FOB (Free on Board)

FOB is an Incoterm that defines when ownership and risk of goods transfer from seller to buyer, usually at the point of loading onto a vessel.

Examples: Under FOB Shanghai, the seller delivers goods onto the ship at Shanghai port, and the buyer is responsible from that point forward.

Advantages: Clearly defines responsibilities and costs in international trade.

Challenges: Misunderstandings can occur if parties confuse shipping terms or documents.

Real-world example: Many U.S. importers purchase goods FOB origin, taking on responsibility once the goods are loaded overseas.

Explain like I’m five: It’s like when your friend hands you a ball — once it’s in your hands, it’s your responsibility.

FAQ: Does FOB apply to air freight? No, FOB is traditionally used only for ocean freight.

Bottom line: FOB clarifies handoff points in global trade but requires precision in contracts to avoid disputes.