What Is FOB (Free On Board)?
FOB (Free On Board) means the seller delivers goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers when goods are loaded on the ship.
In simple terms: Seller gets goods onto the ship. From that point, it's your cargo and your risk.
Most common term: FOB is the standard Incoterm for sea freight from China. Most suppliers quote "FOB [port name]" - e.g., FOB Shenzhen, FOB Shanghai.
Who Pays for What Under FOB
| Cost/Risk | Seller | Buyer |
|---|---|---|
| Export packaging | ✓ | |
| Inland transport to port | ✓ | |
| Export customs clearance | ✓ | |
| Loading onto vessel | ✓ | |
| Ocean freight | ✓ | |
| Cargo insurance | ✓ | |
| Import customs clearance | ✓ | |
| Import duties/taxes | ✓ | |
| Delivery to destination | ✓ |
Risk transfer point: When goods pass the ship's rail at origin port.
Understanding FOB Price
When a supplier quotes "FOB Shenzhen $5.00/unit", this means:
- Price includes the product
- Price includes export packaging
- Price includes transport to Shenzhen port
- Price includes export customs clearance
- Price includes loading onto vessel
You still need to pay:
- Ocean freight to your port
- Marine cargo insurance
- Import duties and customs fees
- Delivery from port to your location
FOB price vs landed cost: FOB is typically 60-75% of your total landed cost. Budget additional 25-40% for freight, duties, and delivery.
FOB Origin vs FOB Destination
In international trade (Incoterms):
- FOB always refers to loading at origin port
- Risk transfers at origin when goods are on the ship
In US domestic shipping (UCC terms):
- "FOB Origin" = Risk transfers at origin (buyer's responsibility)
- "FOB Destination" = Risk transfers at delivery (seller's responsibility)
Don't confuse them: International Incoterms FOB is always "origin" in the domestic sense. For delivered pricing in international trade, use DDP or DAP.
Recommendation: FOB is the best starting point for most China imports. You control freight and have clear cost visibility. More experienced buyers may use EXW for savings or DDP for simplicity.