FOB (Free On Board)
FOB is one of the most familiar delivery terms Turkish exporters use for ocean shipments, built on the buyer arranging the main carriage and insurance. The handover point is clear: responsibility shifts from seller to buyer the moment the goods are loaded on board at the port of shipment.
FOB (Free On Board) is an Incoterms 2020 rule used only for sea and inland waterway transport; the seller loads the goods onto the buyer's nominated vessel at the named port of shipment, and both risk and cost pass to the buyer once the goods are on board.
Where risk and cost transfer
In FOB the critical point is a single place: loading the goods onto the vessel at the named port of shipment. The old 'ship's rail' concept was removed with Incoterms 2010; today the test is that the goods are actually on board.
- Seller: handles export clearance, brings the goods to the loading port and loads them on board; all cost and risk up to that point are on the seller.
- Buyer: nominates the vessel, pays the main freight, and takes on everything after the destination port plus import clearance.
- Risk and cost pass at the same moment: once the goods are on board, the risk of loss/damage and onward costs sit with the buyer.
- Insurance is not mandatory for either party; the buyer typically arranges main-carriage insurance for their own protection.
When to use it
FOB fits traditional ocean transport (bulk, general cargo, much non-containerized freight) and cases where the buyer wants to manage carriage through their own forwarder.
- If the buyer holds the freight contract and the carrier, it leaves main-carriage control with them.
- It is preferred when the seller wants to cap responsibility at the loading port and on-board loading.
- It is for sea/inland waterway only; not for air, road or rail.
- If containerized goods are handed to the carrier at a terminal (before on-board loading), the correct term is usually FCA, not FOB.
Watch-outs and common mistakes
Used in the wrong place, FOB creates a risk gap in practice.
- Container mistake: if goods are handed to the terminal/operator at the port and loaded onto the vessel later, the risk stays with the seller in the window after drop-off but before on-board loading; FCA closes that gap.
- Missing port name: 'FOB' alone is not enough; write the named port and version, e.g. 'FOB Port of Mersin (Incoterms 2020)'.
- Insurance assumption: under FOB the seller has no duty to insure; if the buyer skips insurance, uninsured cargo is exposed to in-transit damage.
- Confusing it with CFR/CIF: under FOB the buyer pays main freight; under CFR and CIF the seller pays freight, but the risk transfer point is still the same as FOB.
How it relates to Sighthem
In Sighthem the Incoterm is chosen at the very start, on the proforma/offer, so price, responsibility boundary and payment terms are settled together.
- The chosen FOB and named port carry through from proforma to shipment as a single source.
- Documents you will need with FOB (such as the bill of lading/B/L, certificate of origin, packing list) are tracked in the shipment's document set.
- This prevents mismatches between the delivery term on the offer and the shipping documents, a frequent cause of L/C discrepancies.
Frequently Asked Questions
What is the difference between FOB and CIF?
Both are sea-only and risk passes to the buyer at the same point (when the goods are loaded on board at the port of shipment). The difference is cost: under FOB the buyer arranges main freight and insurance; under CIF the seller pays freight to the destination port and arranges minimum-cover cargo insurance. So under CIF risk still passes early, but the cost and insurance arrangement sit with the seller.
When exactly does risk pass to the buyer under FOB?
The moment the goods are loaded onto the buyer's nominated vessel at the named port of shipment. Since Incoterms 2010 the 'crossing the ship's rail' test was removed; the criterion is that the goods are actually on board. From that point both the risk of loss/damage and onward costs are the buyer's.
Is FOB the right term for container shipments?
Usually not. Because containerized goods are handed to the terminal or carrier at the port before being loaded, a gap forms between drop-off and on-board loading where the risk stays with the seller. The correct term here is FCA, where delivery is defined at the handover to the carrier. FOB is designed for traditional ocean transport where the seller physically loads goods on board.
Under FOB, who handles export clearance and insurance?
Export clearance is the seller's responsibility; everything up to loading the goods on board at the port of shipment is on the seller. Insurance is not mandatory for either party under FOB; but since risk during main carriage lies with the buyer, the buyer usually arranges cargo insurance for their own protection.
Choosing the Incoterm correctly from the start prevents document mismatches and L/C discrepancies. In Sighthem, pick the delivery term on the proforma and track documents from one place in the shipment's document set.
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