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TMI BlogFOB Incoterm: An IntroductionX X X X Extracts X X X X X X X X Extracts X X X X ..... FOB Incoterm: An Introduction X X X X Extracts X X X X X X X X Extracts X X X X ..... s are loaded onto a vessel at the port of shipment. * The risk and responsibility for the goods are transferred from the seller to the buyer as soon as the goods pass the ship's rail at the named port of shipment. Usage of FOB FOB is commonly used in sea or inland waterway transportation. It applies when goods are being shipped by sea or a vessel. The buyer takes on the costs and risks from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e point the goods are loaded onto the vessel. Exporter Responsibility (Seller's Responsibility) Under the FOB Incoterm, the exporter (seller) has the following responsibilities: * Delivery of Goods: The seller must deliver the goods to the port of shipment and have them loaded onto the vessel nominated by the buyer. * Customs Export Clearance: The seller is responsible for the export customs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formalities and clearance in the seller's country. * Loading onto Vessel: The seller is responsible for the costs associated with loading the goods onto the vessel, including the cost of terminal handling charges at the port of shipment. * Risk Until Loading: The seller assumes all the risk and costs until the goods are loaded onto the ship. Once the goods are on board, the buyer assumes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the risk. * Provision of Documents: The seller must provide the necessary documents (e.g., commercial invoice, packing list, certificate of origin) to the buyer. * Transportation Costs: The seller is responsible for paying the costs to get the goods to the port of shipment, including freight to the port, terminal handling charges, and customs clearance fees in their country. Importer Responsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility (Buyer's Responsibility) The buyer assumes responsibility once the goods are loaded onto the vessel at the port of shipment. The buyer's responsibilities include: * Risk Transfer: Once the goods are on board the vessel, the buyer takes on all risk for loss or damage during transit. * Cost of Freight: The buyer pays for the cost of sea freight from the port of shipment to the final dest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination port. * Import Customs Clearance: The buyer is responsible for customs clearance in the destination country, including paying any import duties, taxes, and handling fees. * Insurance: The buyer should arrange and pay for marine insurance for the goods from the point they are loaded onto the ship to the final destination. * Receiving Goods: The buyer is responsible for receiving the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods at the destination port and arranging for transport to the final location. International Chamber of Commerce Clarification/Guidance of FOB Incoterm The International Chamber of Commerce (ICC) provides specific guidelines for the use of FOB under its Incoterms 2020, which include the following key points: * Port of Shipment: The term FOB must be clearly specified with a named port of shipm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent (e.g., FOB Shanghai), ensuring clarity about the location where the goods will be loaded onto the vessel. * Freight Costs and Risk: The seller's responsibility ends once the goods are on board the vessel at the agreed port of shipment. From that point, the buyer assumes the risk, including the responsibility for the main carriage and insurance. * Freight Charges: If the parties agree t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o include freight charges in the sale price, the seller can still arrange the shipment, but the buyer will take on the cost and risk once the goods are on board the vessel. * Customs and Documentation: Sellers should be clear about the documents they need to provide to facilitate the transaction, including export documentation, and the buyer should ensure that they understand the requirements fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r import clearance. Where and When to Apply FOB FOB is used primarily in maritime transport (sea or inland waterway) and is typically applied when: * Sea Freight: The goods are being shipped by sea from one country to another. * Port-to-Port Shipments: When the transport involves a direct route from one port to another, where the goods do not require additional inland transportation prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being loaded onto the ship. It is important to note that FOB is not suitable for air transport, road freight, or rail transport, as it is specifically related to sea-based shipments. Conclusion FOB (Free On Board) is a widely used Incoterm that divides the responsibilities of sellers and buyers during international trade. It is ideal for transactions involving sea transport, where the seller&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s responsibility ends when goods are loaded onto the vessel at the port of shipment, and the buyer assumes the risk and costs after that point. Key Takeaways: * Exporter (Seller): Responsible for export clearance, loading the goods, and shipping to the port of shipment. * Importer (Buyer): Takes on responsibility for the goods after they are loaded, including the main carriage, import clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance, and insurance.
FOB provides clarity on the transfer of responsibility and helps both parties understand their obligations, ensuring smooth transactions in international trade. It is crucial to define the port of shipment clearly and be aware of the transition of risks and costs in order to avoid disputes. X X X X Extracts X X X X X X X X Extracts X X X X
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