Professional Documents
Culture Documents
Free On Board (FOB) Shipping - Meaning, Incoterms & Pricing - Freightos
Free On Board (FOB) Shipping - Meaning, Incoterms & Pricing - Freightos
Search
Home > Resources > Freight Guides > Your Guide To Free On Board (FOB) Shipping: Meaning, Incoterms & Pricing in 2021
And while no two countries have exactly the same laws, when it comes to freight there are many precepts that are standardized
worldwide.
This means that no matter where you ship from, you will encounter the same regulations. One of the most prominent examples
of this standardization is the International Commercial Term, or incoterm.
Simply put, an incoterm is the standard contract used to define responsibility and liability for the shipment of goods. It plainly
lays out how far along into the process the supplier will ensure that your goods are moved and at what point the buyer takes
over the shipment process. It also has implications for your total freight costs.
FOB
Of the 11 different incoterms that are currently used in international freight, Free on Board (FOB) is the one that you will
encounter most frequently.
This guide cuts through the legal jargon and explains everything you need to know about this common incoterm in plain English.
3. What is the Difference Between FOB Shipping Point and FOB Destination?
The term ‘free’ refers to the supplier’s obligation to deliver goods to a specific location, later to be transferred to a carrier.
https://www.freightos.com/freight-resources/fob-everything-you-need-to-know-about-free-on-board-shipping/ 1/5
7/10/2021 Free On Board (FOB) Shipping: Meaning, Incoterms & Pricing | Freightos
In other words, the supplier is “free” of responsibility. ‘On board’ simply means that the goods are on the ship.
As such, FOB shipping means that the supplier retains ownership and responsibility for the goods until they are loaded ‘on
board’ a shipping vessel. Once on the ship, all liability transfers to the buyer.
Expert's Note
The FOB incoterm is only applied to shipments being sent by sea or waterway.
1. You purchase goods from a supplier in China and agree to FOB shipping terms. The next three steps of the process are carried out at the
supplier’s expense.
2. Your goods are packaged and loaded onto a truck (or another form of transportation) at the supplier’s warehouse (or another facility).
5. Once aboard, the rest of the journey from China is now both your liability and your expense. Anything that happens from this point is on
you.
There are situations where you may be responsible for covering costs before your goods are on board.
When you are shipping loose cargo (ie, not a full container), for example, your goods must go through a Container Freight
Station (CFS) to be consolidated into a container.
Return to top
Just enter the dimensions and weight of your goods and specify the port of shipment, and you’ll get your FOB price calculation
instantly.
If you are sending a full container load (FCL), enter the information under the Containers tab.
1 0 0 0 cm 0 cbm 0 kg
Origin
https://www.freightos.com/freight-resources/fob-everything-you-need-to-know-about-free-on-board-shipping/ 2/5
7/10/2021 Free On Board (FOB) Shipping: Meaning, Incoterms & Pricing | Freightos
Destination
Return to top
What is the Difference Between FOB Shipping Point and FOB Destination?
The qualifiers of FOB shipping point and destination are sometimes used to reduce or extend the responsibility of the supplier in
an FOB shipping agreement.
With FOB shipping point, ownership of goods is transferred to the buyer once they leave the supplier’s shipping point.
From there, the title for the goods transfers from the supplier to the buyer immediately and if anything happens to the goods at
any leg of the journey to the buyer from there, the buyer assumes all responsibility.
With FOB destination, ownership of goods is transferred to the buyer at the buyer’s loading dock.
Upon delivery of the goods to the destination, the title for the goods transfers from the supplier to the buyer.
If anything happens to the goods on any leg of the journey to the buyer, the supplier assumes all responsibility.
Return to top
To further clarify, let’s assume that Claire’s Comb Company in the US purchases a container of The Wonder Comb from a
supplier based in China.
An FOB shipping point agreement is signed and the container is handed off to the freight carrier at the shipping point.
If sending the container to the US costs $1000, Claire’s Comb Company is responsible for paying that sum in full in order to get
the goods.
Return to top
FOB Costs: What is the Difference Between FOB and other sea shipping
incoterms?
There are four incoterms that are applied exclusively to ocean shipments: FOB, FAS, CFR, and CIF.
Understanding the differences between each is as simple as knowing how much responsibility the buyer and supplier assume
under each agreement.
Return to top
The buyer takes responsibility for the shipment once it is placed alongside the shipping vessel.
Unlike FOB shipping, the supplier is not required to ensure the safe movement from port to ship.
Return to top
https://www.freightos.com/freight-resources/fob-everything-you-need-to-know-about-free-on-board-shipping/ 3/5
7/10/2021 Free On Board (FOB) Shipping: Meaning, Incoterms & Pricing | Freightos
This includes any fees associated with export, in addition to the cost of sending your freight to the port of destination.
Once the delivery is unloaded in the receiving country, responsibility is transferred to you.
CFR includes neither insurance nor the costs associated with getting the delivery to your final destination. Also excluded are
customs duties.
Return to top
This means that your shipment is in the proverbial hands of the supplier through the process of transporting them to a port
and loading them aboard a ship. They also cover insurance costs.
The buyer still pays additional fees like customs clearance, however.
Depending on the agreement with your supplier, your goods may be considered delivered at any point between the port of
destination and your final delivery address.
CIF is a more expensive contract option than FOB, as is demands more effort and expense on the part of the supplier.
Expert's Note
Suppliers often charge a premium on this service make the effort worth their while.
Return to top
Other Incoterms
EXW | FCA | FAS | CPT | CIP | CFR | CIF | DPU | DAP | DDP
RELATED CONTENT
https://www.freightos.com/freight-resources/fob-everything-you-need-to-know-about-free-on-board-shipping/ 4/5
7/10/2021 Free On Board (FOB) Shipping: Meaning, Incoterms & Pricing | Freightos
How to Check the Cargo Insurance: Why You Guide To (3PL) Third Party
Legitimacy of Your Need to Cover Your Bases Logistics Providers:
Freight Broker with Freight Insurance Companies, Distribution,
Fulfillment & More
Contact Us ship@freightos.com
Copyright 2011-2021 Freightos Limited | Privacy Policy | Master Services Agreement | Copyright & IP Policy
https://www.freightos.com/freight-resources/fob-everything-you-need-to-know-about-free-on-board-shipping/ 5/5