How to Write an FOB Clause in Your Sales Contract (Template Included)

An FOB clause turns on one visible moment: the goods going on board the vessel. Before that moment, the seller carries the loading work and the risk. From that moment, the buyer carries the voyage, the freight bill, and the risk at sea. A clause that names the port of loading, the vessel, and the Incoterms 2020 edition leaves no room to argue about where that moment sits.

This article gives drafting guidance only and is not legal advice. Ask a lawyer or freight broker to review the signed wording before the goods move.

What the document is for

The FOB clause is the delivery section inside a sales contract. FOB means Free On Board. Under Incoterms 2020, the seller delivers the goods loaded on board the vessel nominated by the buyer at the named port of shipment, and risk transfers to the buyer at that point.¹ FOB applies only to sea or inland waterway transport.¹ It does not set the price, the payment method, or when ownership passes.

The seller transports the goods to the port of shipment, loads them on board the buyer-nominated vessel, and completes export formalities.¹ The buyer designates the carrier, contracts the carriage, and pays freight to the destination port.¹ The buyer also handles import formalities and any transit customs.¹ Risk transfers when the goods are on board, and the buyer bears all costs from that moment onwards.² The clause must state the port, loading point, vessel duty, on-board event, cost split, and proof of delivery.

Required fields explained

Work through each field in order.

• Named port of loading and loading point. Write the port in full, plus the berth or terminal where loading will happen. "FOB Bangladesh" names a country, not a port. The buyer must inform the seller in time of the vessel name and the loading place and point.¹

• Vessel nomination and notice deadline. Name the vessel if known, or state who nominates it and by what date, with a contact and a method of notice. The vessel is the one nominated by the buyer.¹

• Incoterms version. Write "Incoterms 2020" in full, beside the rule and the named port, as "FOB (named port of shipment) Incoterms 2020". Without the edition, the governing rules are not fixed.

• Delivery event and risk transfer. State that delivery occurs, and risk passes to the buyer, when the goods are on board at the named port.² Use one risk point only.

• Loading. State expressly that the seller loads the goods on board the buyer-nominated vessel.¹ If the seller will not load, FOB is the wrong rule.

• Export clearance. State that the seller will complete export clearance, and list the documents supplied, such as the commercial invoice.¹ The seller must also provide, at its own expense, the usual proof of delivery.³

• Main carriage and freight. State that the buyer will contract and pay for carriage from the named port to the destination port.¹ Name the carrier if known.

• Insurance position. State the insurance position in writing, even though FOB imposes no insurance duty on either party.³ If the buyer wants cover from on board, say who arranges it and for what value.

• Import and transit clearance. State that the buyer will handle import clearance and any transit customs.¹ Any seller help with import documents should be written as assistance, not as a transfer of the duty.

• Delivery window, notice, and goods identification. State the loading date or window, and how the seller will notify the buyer once the goods are on board. The seller must give timely notice of delivery, or of a vessel failing to take delivery.¹ Name the goods, quantity, and marks, with the order number or packing list.

Template (table or downloadable)

Copy the table into the contract and fill in every row, replacing bracketed text.

If any port, berth, vessel, loader, carrier, or insurer is still unstated, the clause is not finished.

Filled example

All names, figures, and dates below are examples only, with fictitious parties. Adapt every entry, and have a lawyer or broker review the final clause.

Example clause. Delivery is FOB Mongla, Bangladesh, Incoterms 2020. Example Exports Ltd, the seller, will load 420 cartons of handloom cotton scarves, order number EX-3178, export cleared, on board the buyer-nominated vessel MV River Pearl at berth 3, Mongla, on or between 8 and 10 December. Example Imports BV, the buyer, will nominate the vessel and give notice of its name and the berth by 1 December. The seller will notify the buyer by email on the day the goods are on board. Delivery occurs, and risk passes to the buyer, when the goods are on board. Main carriage, insurance from that point, import clearance, and any transit customs are for the buyer's account. The seller will provide the usual proof of delivery at its own expense.

The example turns on loading, not arrival: the seller does not book the sea journey, insure the voyage, or clear import. For goods handed to a carrier at a terminal days before loading, a different rule fits better.

Common errors

Using FOB for air, road, or rail shipments. FOB applies only to sea or inland waterway transport.¹ Use a rule made for that mode.

Naming a country or a city instead of a port and point. A country holds many ports, and a port holds many berths. Write the port and the loading point inside it.

Writing on-board wording for goods that stop beside the ship. The sentence must match the loading work the seller will do.

Omitting the Incoterms version. Without "Incoterms 2020", the edition governing delivery, notice, and risk is not fixed.

Assuming the seller books the main carriage. Under FOB, the buyer contracts the carrier and pays freight to the destination port.¹

Assuming the seller insures the voyage. Neither party has an insurance obligation under FOB.³ A buyer who wants cover must arrange it expressly.

Using FOB for container cargo handed to a terminal. Containerised goods are typically delivered to a terminal, not on board, and may stay there for days before loading.¹ A carrier-handover rule fits that handover better.

Giving late vessel notice, or none at all. The buyer must inform the seller in time of the vessel name and loading point.¹ If the goods cannot be loaded as a result, risk and added costs can pass to the buyer even before loading.¹

Copying the example without adapting it. An unadapted example port, vessel, or date points at the wrong shipment.

FAQs

Who issues this document?

No authority issues an FOB clause. The buyer and seller agree it together as part of their sales contract, and it takes effect when that contract is signed. Incoterms 2020 supplies the meaning of FOB.

Which fields are mandatory?

The named port and loading point, the Incoterms 2020 version, vessel nomination, the on-board delivery and risk wording, and the clearance and carriage split are the minimum. The window, notice, insurance, proof, and goods details are also needed in practice.

Can it be digital?

A clause can sit inside a contract in electronic form, provided it meets the form, signature, and record requirements of its governing law. Confirm that check first, and keep the proof of delivery with the contract record.

What errors cause delays?

A wrong transport mode, a vague port or point, an unnamed vessel, a missing Incoterms version, and confusion between on-board loading and a terminal handover cause most delays. Each leaves a loading-day question unanswered.

Next steps on Exportain

Read what FOB means in full in FOB Free On Board, compare all eleven rules in Incoterms for Shipments From Bangladesh, and work out what the buyer pays after loading in Landed Cost for Imports From Bangladesh. See also How to Source and Buy from Bangladesh.

Post a free RFQ on Exportain.