FOB

FOB (free on board) is a trade term under which the seller's price includes delivery of goods onto the ship at the loading port, freight paid by the buyer.

FOB is the most common basis for export prices in bulk commodities. When a report says Black Sea wheat or Australian iron ore is quoted FOB, it means the price covers the grain or ore loaded aboard a vessel at the origin port and nothing beyond. Risk passes from seller to buyer once the goods are on board. From there the buyer arranges and pays for the voyage.

Because FOB strips out shipping, it is the cleanest way to compare producing countries against each other. An FOB price in Brazil and an FOB price in Vietnam show what each origin earns, before freight to the same destination is added.

The same cargo priced CIF at the destination will be higher by the freight, insurance, and handling costs. The gap between FOB and CIF quotes for the same commodity is a rough measure of shipping costs on that route. See FOB, CIF and Incoterms.