What is FOB? – FOB incoterms 2020 (Free On Board) is the latest version of FOB ICC’s Incoterms. Free On Board is belong to group F (Main Carriage Unpaid) obliges the seller to perform export customs clearance. The seller does not pay transport and insurance costs. FCA, FAS, and FOB belong to this group.
What is FOB – Free On Board?
Free on Board means that the seller delivers the goods to the buyer:
- On board the vessel, nominated by the buyer, at the named port of shipment or procures the goods already so delivered.
The risk of loss or damage to the goods transfers when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
This rule is to be used only for sea or inland waterway transport where the parties intend to deliver the goods by placing the goods on board a vessel. Thus, the FOB rule is not appropriate where goods are handed over to the carrier before they are on board the vessel, for example where goods are handed over to a carrier at a container terminal. Where this is the case, parties should consider using the FCA rule rather than the FOB rule.
FOB requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty or to carry out any import formalities.
FOB – Free On Board’s Cost and obligation
Blue: Cost/ Yellow: Risk/ Orange: Insurance
Using Incoterms 2020 FOB, the seller takes the cost
- Of export clearance;
- Of delivering the goods to the ship;
- Associated with damage to the goods before loading them to the vessel.
Main obligations of the seller
- The seller has to deliver the goods to the vessel at the place designated by the buyer. He also has to bear the costs involved.
- He obtains permission to export products.
- The seller shall be fully liable for any damage to the goods before loading to the vessel.
- He informs the buyer that the goods have been delivered to the ship.
- He delivers sales notes.
- The seller is responsible for the export clearance and related costs.
On the other hand, buyer takes the cost
- Conected with the conclusion of a transport contract;
- Related to import issues;
- Of import clearance;
- Related to damage or theft of the goods after loading the products onboard.
Main obligations of the buyer
The buyers is responsible for any damage to the goods and theft after the goods have been loaded into the ship.
- He bears the costs related to the conclusion of the transport contract and import issues.
- He shall inform the seller about designated port, the name of the vessel and the delivery date.
- He organizes import clearance and bears the associated costs.
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