What does the shipping term FOB mean in international trade?

In international trade, FOB means “Free On Board,” an Incoterm describing when delivery responsibility transfers to the buyer.

Under a typical FOB sale, the seller delivers the goods on board a vessel nominated by the buyer at the agreed port of shipment. The seller handles export clearance and the costs of getting the goods onto the vessel. Once the goods are on board, the buyer generally bears the risk and subsequent transport costs.

FOB is one of the standardized Incoterms published by the International Chamber of Commerce. The rules help buyers and sellers divide transport, insurance, customs and risk responsibilities in contracts.

A common mistake is using FOB for every form of transport. In the current Incoterms framework, FOB is intended for sea or inland-waterway transport. For containerized cargo handed to a carrier before loading, FCA is often more appropriate because the seller may lose control of the goods before they reach the vessel.