FOB — Free On Board

A maritime rule, and it means it

FOB belongs to the group of Incoterms rules intended only for sea and inland waterway transport. The picture behind it is straightforward: cargo is brought to a named port of shipment and loaded onto a vessel there, and that loading is the moment the seller's part of the physical job ends.

The rule is old, well understood in the trades it was designed for, and still correct for them. The difficulty is that it has spread into places it was never meant to describe.

Why containerised cargo does not fit

A containerised shipment is not handed over at a ship. It is handed over at a container yard or terminal gate, after which the box is stacked, moved, and eventually loaded by parties the seller has no contract with and no visibility of.

Between gate-in and loading there is a period during which the seller has parted with all practical control but, on a strict reading of the rule, has not yet completed delivery. If something happens in that window, the parties discover that their term does not describe their situation. That is not a theoretical risk; it is the ordinary shape of containerised trade.

For that reason FCA is the rule that matches container movements, and the fact that FOB remains in common use for them is a matter of habit rather than fit.

FOB does not settle local charges

Buyers frequently treat an FOB price as though it covered every cost incurred at the origin port. It does not follow automatically. Terminal handling, documentation fees and other origin charges are levied under carriage and terminal arrangements, and how they are apportioned depends on the carrier's tariff and on what the parties agreed, not on the three letters alone.

The result is a familiar dispute in which a buyer receives an origin invoice it did not expect and considers it a double charge, while the seller considers it outside its price. The way to avoid it is to list explicitly which origin charges are in the price and which are not.

The same letters mean something else elsewhere

In United States domestic trade, FOB is used under a different body of commercial law and commonly identifies a delivery point on land, with consequences that do not match the international rule. A contract that simply says FOB, without stating which set of rules it is written under and which version applies, is ambiguous.

The ambiguity is harmless right up until something goes wrong, at which point it becomes the whole argument. Naming the rule set and the version takes one clause.

Where FOB still works

Bulk cargo, breakbulk, heavy lift and project pieces that are lifted directly from quay or barge into the vessel are exactly what the rule describes. There is a real, observable loading event, both parties can see it, and the term maps onto it cleanly.

If the goods will be handed to a carrier before they reach the ship, the honest answer is that a different rule fits better — and changing it is easier before the contract is signed than after a claim.