FOB, short for ‘Free on Board‘, is one of the Incoterms rules established by the International Chamber of Commerce (ICC) to help standardise international commercial transactions. 

In FOB shipments the seller generally bears all costs and risks – including any export formalities, like export customs clearance – until the goods are loaded onto the vessel for transport.

While there are many more variations and complexities that go into the FOB Incoterm, a good shorthand to remember is that the seller will put the goods, for free, on board the shipping vessel.

FOB shipping is one of the more favourable Incoterms for the importer because it balances the imports risk and control, includes customs clearance, and is more cost-effective.

Quite often, yes.

By charging more, a supplier can increase its revenues while keeping product prices competitive. Inflated shipping fees are particularly apparent when margins are thin or the product competes heavily with others on the market. 

Furthermore, because suppliers need time to produce goods, by giving an inflated estimate of shipping costs, they add a buffer in case their estimates are incorrect, or the goods are heavier than originally expected. 

FOB is a good solution for bulk transporting goods from a supplier, as you have full cost control and the supplier is responsible for clearing the goods and export duties, which is one of the most complex and frequent mistakes first-time importers make. 

We’d always recommend getting quotes, researching the different transport options or transport terms, and also understanding where your risks and liabilities are. 

By using an independent professional freight forwarding or specialist logistics company that is independent of the seller, you’ll likely save costs and ensure goods are safely transported to the end destination. 

Read our freight forwarding guide to find out about all of the other forms of shipping, or, if you’d like to find out more about how FOB can be used for your business, read our FOB Guide here.