FOB
Free On Board
Seller delivers goods on board the vessel. The most commonly used Incoterm in African trade - sea freight only.
Visual Guide - Cost & Risk Transfer
Obligations & Cost Breakdown
Seller Obligations
- Deliver goods on board vessel
- Clear goods for export
- Provide transport document (Bill of Lading)
Cost Responsibility:
Buyer Obligations
- Nominate vessel and notify seller
- Pay sea freight from port of shipment
- Import clearance and duties
Cost Responsibility:
Risk Transfer Point
When goods pass ship's rail at port of shipment
Insurance Requirement
Buyer's responsibility (strongly recommended)
Real African Trade Examples
Cocoa Beans: Ghana → Netherlands
FOB Tema PortRaw cocoa beans from Tema Port
Large buyers like Barry Callebaut and Cargill have better freight rates. Seller handles export clearance and loading at Tema.
CIF Rotterdam if buyer requests seller to arrange shipping
Textiles: Ethiopia → USA
FOB Djibouti PortAGOA-eligible apparel from Hawassa
Large US retailers (Gap, PVH) have established freight contracts and prefer FOB terms. Goods trucked from Ethiopia to Djibouti port.
FCA Addis Ababa if shipping via air freight
Cashew Nuts: Tanzania → India
FOB Dar es SalaamRaw cashew nuts for processing
Indian processors buy in bulk and have established shipping lines on the East Africa–India route.
CIF Tuticorin if seller wants higher per-unit pricing
Common African Trade Usage
The dominant Incoterm for African commodity exports - cocoa from Ghana/Côte d'Ivoire, coffee from Ethiopia/Uganda, cashews from Tanzania/Mozambique, and AGOA textile shipments. Most African export contracts with large international buyers default to FOB.
Common Mistakes with FOB
Using FOB for Air Freight
The Mistake: Exporter uses 'FOB Nairobi' for air freight shipment of flowers.
The Problem: FOB means 'Free On Board' a vessel - there's no ship's rail in air freight. Creates legal ambiguity about risk transfer.
The Solution: Use FCA (Free Carrier) for all air freight. 'FCA JKIA Airport, Nairobi' is the correct term.
Using FOB for Containerized Cargo
The Mistake: Using FOB when goods are delivered to an inland container depot, not at the ship's side.
The Problem: Container sits at terminal for days before loading. Who bears risk of damage or theft during storage?
The Solution: Use FCA (named container terminal) for containerized cargo. Risk transfers when goods are handed to terminal operator.
Not Insuring During Voyage
The Mistake: Buyer thinks seller's FOB price includes transit insurance.
The Problem: Under FOB, risk transfers at loading. If goods are damaged during the sea voyage, buyer bears the loss without insurance.
The Solution: Always arrange marine cargo insurance from port of shipment. Consider 110% of FOB value as coverage baseline.
When to Use FOB
Best For
- Bulk commodities (cocoa, coffee, cashews)
- Traditional sea freight
- When buyer has preferred shipping line
- Established trade routes
Avoid When
- Container shipments (risk of theft before loading)
- Air freight
- Multimodal transport