In plain English
Incoterms FOB (sea freight). The seller pays to get the goods onto the ship at the named port of shipment and clears them for export. Once the goods are on board, risk passes to the buyer, who pays for the ocean freight and everything after. It is only for sea and inland waterway transport, and for containers most professionals use FCA instead.
US domestic FOB. FOB origin (also called FOB shipping point) means the buyer takes ownership and risk when the carrier picks up, so the buyer files any claim for damage. FOB destination means the seller keeps ownership and risk until the goods arrive. Who pays the freight is a separate point and is often written next to it, for example “FOB origin, freight prepaid and add”.
Why it matters when you ship
The same three letters mean two different things depending on the contract, so say which one you mean. In a domestic order, FOB terms decide who files the damage claim and who has to insure the shipment. In an export order, they decide who books and pays for the ocean leg.
If you are the buyer under FOB origin, insure the freight yourself. If you are the seller under FOB destination, the carrier’s liability is your problem until delivery.
Example
A retailer orders pallets “FOB origin, freight collect”. The pallets are damaged in transit. Because the buyer owned the goods once the truck left, the buyer files the claim with the carrier.
Related terms
- FCA (Free Carrier)
- FAS (Free Alongside Ship)
- CFR (Cost and Freight)
- CIF (Cost, Insurance and Freight)
- Freight collect
- Freight prepaid
- Prepaid and add
- Incoterms
Learn more
FOB (Free on Board): common questions
What does FOB mean in shipping?
Free on Board. In international sea freight the seller delivers the goods on board the ship at the named port. In US domestic shipping it says whether risk and ownership pass at the origin or at the destination.
What is the difference between FOB origin and FOB destination?
Under FOB origin the buyer owns the goods and carries the risk as soon as the carrier picks them up. Under FOB destination the seller keeps ownership and risk until the goods are delivered.
Who pays freight on FOB terms?
FOB by itself does not settle who pays freight in domestic use. The bill of lading and the order state whether freight is prepaid, collect or prepaid and add. Under Incoterms FOB the buyer pays the main ocean freight.
Cite this page
Cite as: Transportli, “FOB: Free on Board Meaning in Shipping”, https://transportli.com/glossary/fob/, updated November 11, 2026.
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