In global trade, fee on board (FOB) is more than a shipping term — it’s a legal agreement that decides when goods, costs, and risks pass from the seller to the buyer.
If misunderstood, FOB can cause disputes over damage claims, unexpected fees, or delivery delays. For importers and exporters, mastering FOB means:
- Clear cost control
- Predictable delivery schedules
- Fewer shipping disputes
1. What Is Fee on Board?
Fee on board defines the exact point in the shipping process where ownership and risk transfer from seller to buyer.
- Example: FOB Ningbo → Seller delivers cargo, clears export customs, and loads goods on the vessel at Ningbo. From that point, the buyer is responsible.
Why it matters:
- Impacts how much you pay
- Determines when you take on risk
- Affects insurance coverage scope
2. Main Types of FOB
| Type | Risk Transfer Point | Who Pays Freight | Who Pays Insurance |
|---|---|---|---|
| FOB Origin | After loading at seller’s port | Buyer | Buyer |
| FOB Destination | Upon arrival at buyer’s port | Seller | Seller |
Practical Example:
- A buyer in Germany purchasing machinery FOB Shanghai will pay for sea freight, insurance, and import charges from Shanghai to Hamburg.
3. FOB vs Other Trade Terms
| Term | Who Pays Freight | Who Pays Insurance | Risk Transfer Point |
|---|---|---|---|
| FOB | Buyer (Origin) or Seller (Destination) | Depends on agreement | When goods are loaded |
| CIF | Seller | Seller | When goods are loaded |
| EXW | Buyer | Buyer | At seller’s premises |
4. Typical Shipping Times & Terms
| Mode | Avg. Transit from China | Typical FOB Usage | Key Notes |
|---|---|---|---|
| Sea Freight (FCL) | 25–40 days | Origin/Destination | Bulk goods, cost-efficient |
| Sea Freight (LCL) | 28–45 days | Origin | Delays possible due to consolidation |
| Air Freight | 3–10 days | Destination | Time-sensitive shipments |
| Rail Freight | 15–25 days | Origin | China–Europe land trade |
5. Buyer Responsibilities Under FOB
- Pay freight (FOB Origin)
- Arrange cargo insurance (if required)
- Handle import customs clearance and duties
- Manage inland delivery from port to final destination
6. Seller Responsibilities Under FOB
- Prepare and pack goods securely
- Complete export customs clearance
- Load goods onto vessel/aircraft at agreed port
- Provide all necessary shipping documents (Bill of Lading, Commercial Invoice, Packing List)
7. Advantages of FOB
- Cost transparency – Clear split of expenses
- Logistics flexibility – Buyer can choose carriers and routes
- Risk clarity – Defined transfer point reduces disputes
- Negotiation ease – Well-known and widely accepted term
8. Common Mistakes to Avoid
- Vague port naming – Always specify the exact port (“FOB Ningbo” not “FOB China”)
- Assuming insurance is included – It isn’t, unless stated in writing
- Ignoring peak-season surcharges – Can impact cost significantly
- Inaccurate paperwork – Customs delays can be costly
9. When FOB Works Best
- For buyers with established freight partners
- For large-volume or bulk shipments
- For situations where buyer wants freight schedule control
- For goods from multiple suppliers that need consolidation
10. Tips for Smooth FOB Deals
- Confirm insurance responsibilities before signing
- Check carrier schedules in advance
- Document every agreed detail in writing
- Use experienced freight forwarders to manage logistics
11.Conclusion
The fee on board term is a cornerstone of international shipping contracts. By understanding its meaning, types, and cost implications, you can protect your business from hidden expenses and delays. Clear agreements lead to smoother logistics and better profit margins.
Request a Quote
Need a tailored solution for your shipping from China?
Let TJ China Freight Forwarder assist you with reliable, cost-effective service.
FAQ:
Q1.Does FOB include customs clearance?
No, unless agreed otherwise.
Q2.Can FOB apply to air freight?
Yes, though it’s more common in sea freight.
Q3.Is insurance part of FOB?
Not unless stated in the contract.
Q4.How is FOB different from CIF?
CIF includes freight and insurance; FOB does not.
Q5.Can FOB be used for small shipments?
Yes, but more common for larger cargo.