China sourcing glossary
What Is FOB (Free On Board)? When Risk Passes, and When FCA Fits Better
Who does what under FOB?
The seller gets the goods on board, and the buyer arranges the ship.
- The seller packs the goods, clears them for export from China, and delivers them on board the nominated ship at the named port by the agreed date. It gives you the usual proof of delivery.
- The buyer books the ship, often through its own forwarder, and tells the seller the vessel, the loading point and the date. It pays the sea freight, insures if it wants cover, clears import and bears the risk from loading.
Naming your own forwarder doesn't end the seller's job. Unless the contract says otherwise, the seller still has to get the goods to the port, cleared and on board. And risk passing on board doesn't excuse defects or bad packing that existed before loading. Under Chinese law you keep your claim for breach (Civil Code art. 611).
Why do container shipments often use FCA?
Because the handover usually happens before loading. With container cargo, the supplier often gives the goods to the carrier or its agent at a container yard or depot, and the box may wait days before it goes on board. Under FOB the seller keeps the risk during that gap, although it no longer holds the goods. FCA puts delivery at the handover, so risk passes when the seller actually lets the goods go.
FOB can still be used for containers. If you keep it, record the handover and say in the contract who bears the risk between handover and loading.
One worry about switching is the bank. A letter of credit may call for an on-board bill of lading, and under FCA the seller hands over goods that are not yet loaded. Incoterms 2020 added an option for this. The parties can agree that the buyer will tell its carrier to issue an on-board bill of lading to the seller.
These examples are based on matters I have handled. Names, products, places, dates, amounts and other identifying details have been removed or changed. They show the kind of work involved. They don't promise any result.
Acting for a buyer
FOB on paper, handover at the container yard
A container order was written as FOB, but the supplier delivered the goods early to a container yard. Because the buyer had named the forwarder, the supplier took the view that nothing after the handover concerned it. I checked the carriage arrangements and the handover receipts to establish where the seller had actually delivered and when the goods would go on board. Both sides worried that moving to FCA would upset the payment documents, so the transport documents, the bank conditions and the delivery terms were adjusted together, with separate rules kept for packing or quality problems that existed before handover. They moved to an FCA arrangement that matched the real handover, and the documents needed for payment were confirmed before shipment.
What should you check before agreeing FOB?
- The port. A named port and the edition, such as "FOB Ningbo, Incoterms 2020".
- The handover. Where the supplier will actually give up the goods: on board, or at a yard, depot or forwarder's warehouse. If it is not on board, consider FCA at that place.
- The nomination. Who books the ship, and how and by when you will give the vessel and loading date.
- Port charges in China. Which side pays the terminal and document fees before loading. Write it down.
- Proof for payment. Which document you pay against: an on-board bill of lading, a forwarder's cargo receipt or something else. Match it to your letter of credit, if you use one.
- Condition at handover. Photos or a tally record when the goods leave the supplier's hands.
Questions from overseas buyers
What if my ship arrives late and the goods are damaged while they wait?
The risk may already be yours. Under Chinese law, if delivery is late because of the buyer, the buyer bears the risk from the time of its breach (Civil Code art. 605). Incoterms 2020 FOB has a similar rule where the buyer's ship fails to arrive on time, provided the goods are clearly identified as yours.
Who has to insure under FOB?
Neither side, by default. The risk is yours from loading, so arrange your own cargo cover to start at loading at the latest.
Can I use FOB for air freight?
It isn't designed for it. FOB is for sea and inland waterway transport. For air, use a rule for any transport mode, such as FCA at the supplier's premises or at the airport.
I draft purchase contracts for overseas buyers of standard products from China →
Sources and translations
- Civil Code of the PRC (2020), arts. 605 and 611.
- ICC, Incoterms® 2020, FOB and FCA (referred to by name; not quoted).
Translations are mine and unofficial.
Official texts cited in this article.
- Civil Code of the PRC (2020) npc.gov.cn
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