FOB (Free on Board)
Incoterms 2020 rule: seller is responsible until goods are loaded on board the vessel at the named port; all risk and cost pass to the buyer from that moment.
In detail
FOB is the most widely used Incoterms rule in China trade. Under FOB, the seller's obligations end when the goods are loaded on board the vessel at the named port of shipment. From that point, the buyer (importer) bears all risk of loss or damage and pays for: ocean freight, marine insurance, destination terminal handling, and import customs clearance. FOB price in the invoice represents: cost of goods + inland transport to the Chinese port + export customs clearance in China. To calculate the Russian customs value from FOB: add ocean freight and insurance to get the CIF value. The buyer's advantage of FOB: full control over choice of freight forwarder and freight rate negotiation. FOB applies only to sea or inland waterway transport. For other transport modes, FCA is the equivalent. Under Incoterms 2020, FCA allows for issuance of an on-board B/L, which is important for letter of credit transactions.
Examples
- →FOB Shanghai: supplier loads container, buyer arranges freight forwarder from Shanghai to Moscow
Related terms
CIF (Cost, Insurance and Freight)
Incoterms 2020 rule: seller pays freight and provides minimum insurance to the named destination port, but risk transfers to the buyer at the port of loading.
DAP (Delivered at Place)
Incoterms 2020 rule: seller delivers to a named destination in the buyer's country; import customs clearance and duties remain the buyer's responsibility.
DDP (Delivered Duty Paid)
Incoterms 2020 rule: seller takes maximum responsibility — delivers to the buyer's premises with all import duties and taxes paid.
Freight Forwarder
A company that arranges international cargo transportation on behalf of shippers — booking carriers, managing documentation, and coordinating the logistics chain.