What Is FOB?

FOB is a short code written next to the price on a quotation or invoice, followed by a named port, such as FOB Mumbai. The ICC publishes it as one of the eleven Incoterms 2020 rules. Under FOB the seller arranges the goods up to the point they are loaded on the ship, which includes export packing, transport to the port and export clearance. The buyer chooses the vessel, pays the sea freight and carries the risk after loading. The rule is meant for sea and inland waterway transport. For containerised cargo handed to a terminal before loading, the ICC points to other rules, so check the choice with your forwarder.

For example, a Chennai exporter of garments quotes USD 10,000 FOB Chennai. The buyer books the vessel and pays the sea freight. The exporter delivers the cartons on board at Chennai and the invoice shows FOB Chennai next to the price.

• Pricing: An FOB price leaves out sea freight and cargo insurance, so it is lower than a price on a term that includes them. State the named port so the buyer can compare quotes.
• Risk: Risk moves to the buyer once the goods are on board. Keep the bill of lading and loading proof as evidence of that moment.
• Bank compliance: Your AD bank may ask for the invoice and shipping documents when it matches receipts to an export under the FEMA export regulations. A clear FOB statement and port on the invoice makes the value easy to read.
• GST and income tax: FOB is a delivery convention. GST and income tax treatment of an export depends on the law, so ask your adviser rather than rely on the term alone.

The seller and buyer agree FOB with a named port, the seller loads the goods on the buyer's vessel, and the risk passes at that point.

1. The parties agree FOB and name the port of shipment in the contract, with the edition, for example Incoterms 2020.
2. The buyer books the vessel and tells the seller the shipping details.
3. The seller packs the goods and moves them to the port.
4. The seller completes export clearance and loads the goods on board.
5. The risk passes to the buyer once the goods are on board.
6. The seller raises the invoice showing FOB and the port, and keeps the shipping documents.

You quote the price with the letters FOB and a named port of shipment, and repeat that wording on the invoice. Confirm with your buyer who will book the vessel before you send the quote.

1. List your own costs up to loading, such as packing, inland transport and port handling.
2. Add your margin to reach the goods price.
3. Write the price as FOB plus the named port, for example FOB Nhava Sheva.
4. State the edition, for example Incoterms 2020.
5. Agree in writing that the buyer books the vessel and pays the sea freight.
6. Show the same term on the proforma and commercial invoice.

FOB leaves sea freight and insurance with the buyer. CIF puts both on the seller up to the destination port, although risk still passes at loading. Pick the one that matches who arranges the voyage.

• Air freight: FOB is for sea and inland waterway transport. For air or road shipments the ICC lists other rules, so FOB is the wrong label there.
• Payment: FOB sets delivery tasks, costs and risk. When the buyer pays is a separate contract term, see export payment terms.
• Services: Incoterms cover the sale of goods. A services invoice does not carry FOB.
• Law: FOB applies only when the parties name it in the contract. It is not a law.

• CIF: Seller pays freight and minimum insurance to the destination port.
• EXW: Seller makes goods available at its own premises.
• DDP: Seller delivers goods cleared for import at the destination.
• Incoterms: The ICC set of eleven trade terms.
• Bill of lading: The carrier's document for goods shipped by sea.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. ICC, Incoterms rules, Eleven trade terms; Incoterms 2020 in force 1 January 2020 (checked 9 Oct 2026)
2. RBI, FEMA (Export and Import of Goods and Services) Regulations, 2026, FEMA 23(R)/2026-RB, Export monitoring and AD bank matching of receipts (checked 9 Oct 2026)