FOB Incoterm® (Free on Board)

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When Does Responsibility End in Maritime Trade?

In international shipping, the transition of responsibility between seller and buyer is not always obvious. While goods may physically move from one party to another, legal and financial liability often depends on carefully defined contractual terms. For companies engaged in global trade, understanding where that line is drawn is essential.

This is precisely where Incoterms® come into play. Published and maintained by the International Chamber of Commerce (ICC), these standardized terms define the roles, responsibilities, and risk distribution between buyers and sellers during international transactions. One of the most widely used Incoterms® for maritime transport is FOB – Free On Board.

What Is FOB Incoterm®?

FOB (Free On Board) is an official Incoterm®2020 rule used exclusively for sea and inland waterway transport. Under FOB, the seller is responsible for delivering the goods on board a named vessel at the port of shipment. Once the goods are loaded, the risk and cost transfer to the buyer.

FOB clearly defines the point at which liability shifts, which is essential for minimizing disputes and ensuring contractual clarity.

An overview of all incoterms is available here.

Incoterms 2020 responsibilities

Advantages of Using FOB

Clear risk demarcation
FOB defines an unambiguous point where risk transfers — the moment goods are on board. This reduces the likelihood of miscommunication or liability conflicts.

Buyer control over main carriage
Once the goods are loaded, the buyer selects the carrier, negotiates freight terms, and oversees the remainder of the transport chain — often optimizing cost and efficiency.

Seller focus on local logistics
The seller’s responsibility ends at the loading stage, allowing them to limit their involvement to local transport and export procedures.

Potential Drawbacks of FOB

Not ideal for containerized cargo
In container shipping, goods are typically handed over at a terminal, not directly loaded on a vessel. In such cases, FCA (Free Carrier) is more appropriate.

Risk borne by buyer during ocean freight
From the moment goods are loaded, the buyer assumes full risk. Delays, damage, or loss during transit fall entirely on the buyer unless separately insured.

Risk of loading disputes
Although loading is the seller’s responsibility, any damage or delays during this stage can lead to disagreements. Clear contract terms and loading procedures are essential.

Practical Example: FOB in Use

A European supplier sells mechanical parts to a distributor in Southeast Asia. The agreed delivery term is FOB – Port of Rotterdam. The supplier arranges inland transport, handles export clearance, and ensures the goods are loaded onto the buyer’s nominated vessel. Once loaded, the buyer takes over responsibility, organizing ocean freight, insurance, and delivery to the final destination.

Choosing the Right Incoterm® for Your Business

Whether you are exporting raw materials or importing finished goods, selecting the correct Incoterm® is critical for risk management and operational clarity.

Do you frequently engage in international shipments by sea?
Would you benefit from clearer division of transport responsibilities?

Contact our logistics team for expert advice on FOB, FCA, or other Incoterms®, and discover the most effective transport strategy for your specific trade scenario.

FOB Incoterm

Not typically. Containerized shipments are better served under FCA, as containers are usually handed over at a terminal, not directly onboard a ship.

The buyer is responsible for ocean freight, marine insurance, and all import procedures from the port of shipment onward.

No. Insurance is the buyer’s responsibility once goods are loaded onto the vessel.

No. FOB applies only to maritime transport. For air or multimodal shipments, terms like FCA are more appropriate.

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FAS Incoterm® (Free alongside Ship)

What is FAS Incoterm®?

FAS (Free Alongside Ship) is one of the official Incoterms®2020 rules published by the International Chamber of Commerce (ICC). It applies exclusively to maritime transport and means that the seller is responsible for delivering the goods alongside the vessel at a named port of shipment. At this point, risk and cost transfer from the seller to the buyer.

Incoterms® are globally standardized trade terms that define who is responsible for transportation, costs, and risk during international shipping. The latest version, Incoterms® 2020, came into effect on January 1st, 2020.

An overview of all incoterms is available here.

Incoterms 2020 responsibilities

 

The Free Alongside Ship (FAS) Incoterm is an international trade agreement that is used for transport by water. In an FAS arrangement, the seller is responsible for delivering the goods to a named port, placing them alongside the vessel. The transfer of risk and cost occurs when the goods are alongside the ship and ready for export.

Advantages FAS Incoterm®

Clear Transfer of Risk

FAS provides a clearly defined point where responsibility transfers from seller to buyer: when the goods are placed alongside the vessel. This reduces the risk of misunderstandings or disputes.

Buyer Controls the Main Transport

Once goods are alongside the ship, the buyer takes over transport arrangements, which allows them to choose their preferred carrier, shipping schedule, and potentially negotiate lower freight rates.

Widely Applicable in Maritime Trade

FAS is particularly suitable for bulk cargo and large-volume shipments where the buyer has experience managing ocean freight or prefers to control logistics beyond the port of departure.

Drawbacks FAS Incoterm®

Limited Seller Responsibility

The seller’s responsibility ends before the goods are loaded onto the ship. If damage occurs during loading or the main transport, the buyer bears the risk and must handle insurance or claims.

Early Risk Transfer

Risk transfers to the buyer at the port, not after loading or departure. If the goods are damaged after being placed alongside the ship but before loading, the buyer is still responsible.

Risk of Disputes

Disagreements may arise if the loading process is unclear or if issues occur during shipping. It’s crucial to define in the contract who handles loading, inspections, and documentation.

Example of FAS in Practice

A wine producer in France sells bulk wine to a distributor in the United States. The agreed Incoterm is FAS – Port of Marseille.
The seller delivers the wine in barrels to the Marseille port and places them alongside the vessel. From that moment, the buyer handles the loading, sea freight to New York, and customs clearance.

 

Summary Free alongside Ship

  • Transport Mode: Maritime (sea or inland waterway only)

  • Seller Obligation: Deliver goods alongside the ship at named port

  • Buyer Obligation: Handle loading, main carriage, insurance, import

  • Risk Transfers: When goods are placed alongside the ship

  • Best For: Buyers who want control over ocean freight and logistics

In summary, FAS provides a clear transfer of risk and is suitable for buyers seeking control over transportation logistics. However, sellers have limited responsibility after the goods are placed alongside the ship. Careful communication and a well-drafted contract are essential to ensure a smooth FAS transaction and avoid potential disputes.

Do you frequently require goods to be transported in short sea of ocean freight, either as seller or as buyer? If you would like to discuss which Incoterms® and transport solution fit best to your case, 

Need Help Choosing the Right Incoterm®?

Do you frequently import or export goods via sea freight?
Are you unsure which Incoterm best suits your business?

Contact our logistics experts for personalized advice on Incoterms® and optimal transport solutions.

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