Understanding Incoterms – FOB (Free on Board)

If you are an importer or exporter there are a number of International Commercial Terms (otherwise known as Incoterms) you should be familiar with. In this article we’re going to look at what FOB (or Free on Board) means.

When buying goods FOB basically the seller is responsible for getting the goods on the vessel ready for export. For a shipment to qualify as FOB the following terms needs to be met:

  • The seller must load themselves the goods on board the vessel nominated by the buyer
  • Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!).
  • The seller must clear the goods for export. The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715).
  • The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. This term has been greatly misused over the last three decades ever since
    Incoterms 1980 explained that FCA should be used for container shipments

The graphic below outlines who is responsible for which part of the shipping process.

Incoterms-FOB

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