FOBFree on Board

FOB is the term most Indian exporters reach for first, and the one most buyers misread. This page explains what it does, where it stops, and when you should ask for something else.

In May 2026 an Indian exporter posted a warning on LinkedIn under the title "the FOB trap". His point was simple - your buyer agrees a FOB price, books a forwarder, and then sees a separate bill for "origin charges" at the Indian port that nobody put in the landed cost (LinkedIn, Indian exporter, May 2026 (opens in a new tab)). We'll carry that buyer through the page, because nearly every FOB mistake starts with the same belief: that FOB is a complete price. One caveat before we start. The rules quoted are Incoterms 2020, in force since 1 January 2020, and as of 28 September 2026 the ICC has published no newer edition, so 2020 is the version to write on every quote.

What FOB Actually Means

Free on Board. The seller delivers the goods on board the vessel you nominate, at the named port of shipment, cleared for export. From that moment the goods are yours to carry, insure and clear at home.

It's a sea and inland waterway rule only. The ICC says plainly that FOB is for goods delivered on board a vessel and shouldn't be used for containers handed to a carrier at a terminal. Hold that thought, because it's the second trap on this page.

Who does what

Where The Risk Passes, And Where The Bill Doesn't

Risk moves from the seller to you when the goods are on board the vessel at the named port. Not when they leave the factory in Tiruppur and not when the box enters the gate at Tuticorin. On board.

Costs are meant to split at the same point, and that's where our exporter's buyer came unstuck. Loading on board is the seller's job, so in theory the seller pays terminal handling. In practice the Indian port bills those charges on the line's tariff to the booking party, and under FOB the booking party is your forwarder. So they land on your forwarder's invoice, and then on yours. The exporter in our story wasn't hiding anything. The system just routes the bill to the wrong side of the rule.

The fix is boring and it works. Before you compare two FOB quotes, ask your forwarder for the full origin charge list for that port and that line, and write in the PO which of those charges the seller carries. Then your FOB number means what you thought it meant.

How To Write It So Nobody Can Argue

Write the rule, the port and the edition together - FOB Nhava Sheva, Incoterms 2020. If the port has more than one terminal then name the terminal too.

"FOB" with no port is not a price. FOB Nhava Sheva, FOB Chennai and FOB Mundra are three different numbers, because the seller's inland haul, port charges and paperwork differ at each. They're three different transit times too, and which port to write is on sea freight routes. How to put the term, the place and the rebate assumption on the RFQ itself is on MOQ and pricing.

The Container Problem Nobody Mentions

FOB fits bulk and break-bulk cargo loaded straight onto a ship: castings on pallets craned aboard, bagged rice, machinery. It also fits any buyer with their own forwarder who wants to control the sea leg, which is most of you.

It doesn't fit containers, strictly speaking. A container is handed to the carrier at a freight station or terminal, often days before the ship arrives, and under FOB the seller still carries the risk for those days without being able to do anything about it. The ICC's own guidance is to use FCA for containers, and it published a short best-practice note on that in March 2024. The Indian market quotes FOB for containers anyway, and most buyers live with the gap. We'd rather you knew it was there, and if a box is damaged in the terminal before loading, you'll be glad you did.

Who Is Really The Exporter?

A supplier on India's GST composition scheme can't export under that registration. If such a firm quotes FOB then another entity will file the shipping bill. That's not a crime (traders and merchant exporters are a normal part of Indian trade), but you should know whose Importer Exporter Code your goods travel on, because that's who answers for the export paperwork (verify suppliers).

Under FOB the seller also owns the VGM and the export filings, which is why rollovers caused by late paperwork are a seller problem you still feel. A document deadline a few days before the vessel cut-off, written into the PO, turns "the ship left without us" into a breach you can point at.

What FOB Means For Your Landed Cost And Customs Value

FOB is the cleanest number to build a landed cost on, because everything after the deck is yours to quote separately. Use the landed cost calculator, and don't leave the origin-charges line at zero. That line is the whole of our exporter's warning.

Customs value is where destinations differ. The US bases value on the price paid excluding international freight and insurance, which is close to your FOB figure (19 CFR 152.102). New Zealand values on an FOB basis (NZ Customs valuation guide, May 2025), and Australia works the same way (ABF valuation fact sheet (opens in a new tab)). The UK adds transport and insurance to the UK border (GOV.UK Method 1 (opens in a new tab)), and the EU adds transport to the point of entry, so there your FOB price plus freight becomes the base. The whole method is on working out the real import duty.

Control is the reason we like FOB and FCA over the C and D terms for India. You pick the forwarder and the line. If the supplier picks them then a payment dispute between agents can hold your container at destination for weeks, and you're the one waiting. If your supplier can't book freight or clear export in its own name, you need an Indian forwarder and sometimes an exporter of record, and SourcingSync (opens in a new tab) does that work.

FOB Origin And FOB Destination: A Note For US Readers

If you buy for a US company then you grew up with a different FOB. The Uniform Commercial Code defines "F.O.B. the place of shipment", which the trade calls FOB Origin, and "F.O.B. the place of destination", FOB Destination. Under the second, the seller must "at his own expense and risk transport the goods to that place" (UCC §2-319 (opens in a new tab)). Add "Freight Collect" or "Freight Prepaid" and you've said who pays the trucker, which is a separate question from where the risk passes.

None of that is Incoterms FOB. The Incoterms rule has one meaning, on board a vessel at the named port of shipment, and it has no destination version at all. A US buyer who reads "FOB Nhava Sheva" as FOB Origin, freight collect, lands close enough. One who reads it as FOB Destination is wrong by an ocean.

Is §2-319 still law? Yes. A 2003 rewrite of Article 2 was enacted by no state and withdrawn in 2011 (Uniform Law Commission (opens in a new tab)), and the official text still carries §2-319 (ALI Permanent Editorial Board, December 2024). Check your own state's version, but expect it there.

So write FOB Nhava Sheva, Incoterms 2020 and nothing else on that line. Not "FOB Origin", not "FOB India". If your forwarder wants freight-collect wording then put it in the shipping instructions. And price the US side properly. One first-time buyer bringing Indian goods to New Jersey was told the trucking inland could cost more than the whole trip from India, and found the ISF filing and the broker were theirs too (r/logistics, 2024 (opens in a new tab)). FOB ends at the deck in India. Everything on the US side, all the way to your door, is yours.

"FOB Value" On Indian Paperwork Isn't Your Term

You'll meet "FOB value" on the Indian shipping bill and the exporter's bank paperwork even when you bought CIF or DAP. It isn't a trade term. It's the number Indian customs asks the exporter to declare, because RoDTEP is worked out as "a percentage of FOB value with a value cap per unit" (DGFT, Foreign Trade Policy 2023, para 4.54). That's one honest reason Indian exporters prefer quoting FOB.

So the FOB value on the shipping bill can differ from the price you agreed, because a CIF or DAP contract gets freight and insurance backed out before filing. That's normal. Don't read "FOB value" on a document as a FOB quote. The term on the contract is the term. Where the invoice number must line up across the shipping bill and your certificate of origin, see certificate of origin.

FOB vs Its Neighbours

• FOB vs FCA. Same idea, different handover. FCA passes risk when the goods reach your carrier at a named place, such as the factory or an inland depot. For containers, it's the ICC's recommendation.
• FOB vs FAS. FAS stops alongside the ship on the quay. FOB goes one step further, on board.
• FOB vs CFR and CIF. Same risk point. The seller also books the freight, and under CIF buys minimum insurance.
• FOB vs EXW. EXW leaves export clearance to you, which a foreign buyer can't do in India. FOB puts it on the seller, where it belongs.

For a plainer, first-person comparison of FOB, CIF and DDP for ecommerce sellers, Yash's post on CIF, DDP and FOB covers it.

Back To The FOB Trap

Our exporter's buyer didn't sign a bad term. They signed a good one and read it as a complete price. FOB is still the term we'd pick for most India shipments, with one change: before you accept it, get the origin charge list from your forwarder, decide in writing who pays each line, and put the document deadline in the PO. Do that and FOB is exactly what it looks like.