Incoterms
FOB
Free On Board
In plain English
The factory's price covers your goods made, packed, and loaded onto the ship at their export port — from that rail onward, the freight, insurance, and risk are yours.
FOB is the honest middle of the Incoterms — it splits the journey at a clean, visible line: the ship's rail at the origin port. Everything up to that point is the factory's job and the factory's cost; everything after it is yours to arrange. That single handoff is why most experienced buyers ask for an FOB quote by default.
The reason is leverage. Because freight isn't baked into the number, an FOB price lets you shop the ocean leg competitively through your own freight forwarder — instead of accepting whatever margin a factory quietly adds when it quotes CIF or DDP door-to-door. Two FOB quotes from two factories are also directly comparable, since neither one is hiding a shipping markup inside the unit price.
The catch is that FOB is not your landed cost. A low FOB number still has ocean freight, insurance, destination charges, import duty, and the last mile stacked on top of it before a unit reaches your warehouse. Read FOB as a starting line, not a finish line — then build the full landed math before you compare anything.
Who pays what under FOB
- Production & packing
- Export clearance at origin
- Haulage to the load port
- Loading onto the vessel
- Ocean freight
- Marine insurance
- Import duty & customs
- Last-mile delivery
Risk transfers once goods are on board
Related terms
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