Free On Board and the line drawn at the ship

On board is the dividing line

Placement of the goods on board the nominated vessel completes the seller's delivery obligation, and the buyer's exposure begins there. Loading costs up to that point are the seller's; carriage from the port of loading is contracted and paid by the buyer. The precision of the line is what made the rule useful for cargoes loaded directly by crane, grab or pipeline, where the moment of loading is observable and often attended by surveyors.

The container mismatch

Containers are gated into a terminal well before loading, and control passes to the terminal at that moment rather than at the ship. A seller nominally bearing the exposure from gate-in to loading is carrying a risk it cannot see, cannot insure sensibly and cannot mitigate. Every terminal fire, stack collapse or yard incident in that window produces an argument between parties who both believed they were covered.

Costs that straddle the operation

Terminal handling at the load port, stevedoring, securing and lashing, and any charge the carrier levies for loading are allocated differently under different carriage contracts and local practice. The trade term addresses the sale, not the carriage tariff, so a seller can find that a charge it assumed was inside the freight has been billed separately. Naming the port precisely and agreeing which loading charges are for whose account prevents the majority of these disputes.

Why it persists anyway

Habit, familiarity in banking and documentary practice, and the fact that a great deal of commodity trade genuinely does load the way the rule describes. For containerised goods, the term that keeps the same commercial split of freight cost while moving delivery to the point where the seller actually loses control is the delivery-to-carrier rule, and switching to it is usually a paperwork change rather than a commercial concession.

Frequently asked questions

Can the rule be used for air freight?

It is written for sea and inland waterway carriage, so applying it to air leaves the delivery point undefined in any meaningful way. A term from the any-mode family should be used instead, naming the airport facility where the goods are handed over.

Who nominates the vessel?

The buyer, since the buyer contracts the main carriage. The seller needs the nomination in time to deliver within the agreed period, so contracts normally set out how and when nomination is given and what happens if it is late.

Does the seller have to insure the goods?

There is no insurance obligation under this rule for either party. The seller bears its own exposure to the point of delivery and the buyer bears it afterwards, and each side decides for itself whether to buy cover for the period it is carrying.