Free on Board (FOB)
An Incoterm where the seller delivers goods on board the vessel at the named port of shipment. Risk transfers from seller to buyer once goods pass the ship's rail.
Free on Board (FOB) is the most commonly used Incoterm in international trade between importers and overseas factories. Under FOB terms, the supplier is responsible for manufacturing the goods, transporting them to the port, clearing export customs, and loading them onto the vessel. Once the goods are on the ship, all risk and cost transfer to the buyer.
FOB pricing is the standard way suppliers quote prices on platforms like Alibaba and Global Sources. When a factory quotes you "$2.50 FOB Shenzhen," that means the price includes everything up to loading the goods onto a ship at the port of Shenzhen. You, the buyer, then arrange and pay for ocean freight, insurance, customs clearance at the destination, and last-mile delivery.
For most DTC founders importing from Asia, FOB is the recommended Incoterm. It gives you control over shipping costs by letting you choose your own freight forwarder, which often results in better rates than the supplier's forwarder. It also gives you visibility into the shipping process and lets you consolidate shipments from multiple suppliers.
Why it matters
Always negotiate FOB pricing rather than CIF. This lets you pick your own freight forwarder and avoid inflated shipping markups from the supplier.
Practical Tip
Always negotiate FOB pricing rather than CIF. This lets you pick your own freight forwarder and avoid inflated shipping markups from the supplier.
You'll hear this when…
When requesting quotes
“"Please provide your best FOB price for 500 units shipped to Los Angeles."”
When reviewing shipping documents
“"The bill of lading shows the goods were transferred under Free on Board (FOB) terms at the port of Shenzhen."”
When negotiating payment
“"We'd like to confirm whether your quoted price is on Free on Board (FOB) basis before finalizing the purchase order."”
Related Terms
Cost, Insurance, and Freight
CIFAn Incoterm where the seller pays for cost of goods, insurance, and freight to the named destination port. Risk transfers to the buyer once goods are loaded on the vessel at origin.
Ex Works
EXWAn Incoterm where the seller makes goods available at their premises. The buyer bears all costs and risks from the factory door onward, including export clearance.
Free Carrier
FCAAn Incoterm where the seller delivers goods, cleared for export, to a carrier nominated by the buyer at a named place. Risk transfers at the point of handoff to the carrier.
Incoterms
A set of 11 internationally recognized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities, costs, and risks between buyers and sellers in international transactions.
Freight Forwarder
A logistics company that arranges international shipping on your behalf, handling booking cargo space, documentation, customs brokerage, and coordinating the door-to-door movement of your goods.
Port of Loading
POLThe port where goods are loaded onto the ocean vessel at the origin country. The choice of POL affects freight costs, transit times, and under FOB terms, is where risk typically transfers from seller to buyer.
This term appears in every Bottlecap report.
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