Flexport Glossary Term | FOB (Free on Board) (2024)

FAQs

Flexport Glossary Term | FOB (Free on Board)? ›

FOB (Free on Board) is an incoterm that requires the seller to clear the goods for export, deliver the goods to the ocean vessel, and place the goods on board. Cost and risk transfer from the seller to the buyer once the goods cross the ship's rail.

Under Free on Board, the seller is responsible for delivering the goods to the port of departure, clearing it for export, and loading the goods on the vessel. Once the goods are on the vessel, the risk transfers from the seller to the buyer, who from that point is responsible for all costs thereafter.

Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated. The point the goods are safe aboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.

What is the difference between FCA and FOB? FCA is an Incoterm which works for all modes of transport. FOB is only used in waterway shipments. Under FOB, the seller is responsible for loading the cargo onto the vessel, but with FCA, it is the buyer's responsibility.

First of all, FOB – or F.O.B. – stands for Free On Board. It is the point in the supply chain where the seller relinquishes ownership, and the buyer accepts ownership of products purchased in a specific transaction.

Freight on Board (FOB), also referred to as Free on Board, is an international commercial law term published by the International Chamber of Commerce (ICC). It indicates the point at which the costs and risks of shipped goods shift from the seller to the buyer.

The primary difference between using cost and freight (CFR) and free on board (FOB) shipping lies in who must pay for various shipping or freight costs—the buyer or the seller. The terms refer to the point at which transfer of responsibility for goods shipped occurs, from the seller/shipper to the buyer/receiver.

FOB stands for “free on board” or “freight on board” and is a designation that is used to indicate when liability and ownership of goods is transferred from a seller to a buyer.

There are 11 Incoterms in total, and they are divided into two categories: Incoterms for Any Mode of Transport: These include EXW (Ex Works), FCA (Free Carrier), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To), DAP (Delivered at Place), DPU (Delivered at Place Unloaded), and DDP (Delivered Duty Paid).

According to the U.S. Commercial Service, “The most common Incoterms are EXW (Ex Works); FOB (Free On Board); CIF (Cost, Insurance, and Freight); CPT (Carriage Paid To); DDU (Delivered Duty Unpaid); and DDP (Delivered Duty Paid).”1 This causes concern as the term DDU was replaced in the latest revision of these ...

What are the different types of Free on Board? ›

There are two main types of free on board freight with several sub-designations, including FOB destination and FOB shipping point. Free on board is an international trade term under the Incoterms rules published by the International Chamber of Commerce (ICC).

What is the difference between FOB and FAS? FOB means free on board, and differs from FAS in that the seller will pay the costs of export clearing and unloading.

CIF gives the seller more control over logistics, enabling them to choose their preferred carrier and insurance provider. FOB, on the other hand, gives the buyer more control over logistics. With FOB the buyer can opt for the carrier and insurance cover of their choice once the goods are loaded onto the ship.

Free on board, often abbreviated as “F.O.B.,” applies to the sale of goods and indicates that purchased property will be placed on board a vessel for shipment at a designated place without expense to the buyer for packing, potage, cartage, etc.

Simply put, on the whole it's recommended that buyers use FOB, and sellers use CIF. FOB provides greater control and saves buyers money, but CIF helps sellers maintain a higher profit. The caveat being that new buyers would be better advised to use CIF until they get accustomed to the import process.

With FOB, the seller is responsible for the goods until they are loaded onto a ship, while with FOD, the seller is responsible for the goods until they are delivered to the buyer's designated location.

All modes of transport are available under an FCA. These include trucks, shipping vessels, trains, and aircraft. Two transportation modes are allowed under FCA. Conversely, FOB only allows product delivery via the sea or inland waterways.

FOB [place of origin], Freight Collect:

The seller is responsible for delivering the goods to the specified location, but the buyer is responsible for paying the freight costs from that point forward.

What is the difference between FOB and FAS? FOB means free on board, and differs from FAS in that the seller will pay the costs of export clearing and unloading.

Most buyers choose FOB because it's arguably the most affordable or cost-effective option. Under the FOB terms, buyers do not usually pay the higher fees that CIF protection plans incur. With Free On Board, the buyer has more flexibility and control of the terms, the cost, freight planning, and more.