FOB (Free On Board) is one of the commonly used trade terms in international trade. In an FOB transaction, the buyer is responsible for dispatching ships to deliver the goods. The seller shall ship the goods to the vessel designated by the buyer at the port of shipment and within the specified time limit stipulated in the contract, and notify the buyer in time. When the goods are loaded on the designated vessel at the port of shipment, the risk is transferred from the seller to the buyer.FOB
Matters needing attention
(1) The buyer must bear all costs and risks of loss or damage of the goods from the point of delivery. That is to say, if the goods are in danger at sea or encounter piracy, it will have nothing to do with the seller. The buyer should not refuse to pay for the goods for this reason, so the seller may suggest that the buyer insure the goods.
(2) FOB price includes all domestic expenses. If there are more goods or higher profits, domestic expenses can be ignored. If there are fewer goods, we need to raise the price accordingly.
(3) When FOB terms are used, the seller completes delivery when loading the goods on board the ship at the port of shipment, while the buyer is responsible for chartering and booking the shipping space, so the buyer and seller must pay attention to the problem of cargo convergence. In order to avoid the occurrence of the arrival of the buyer’s ship and the failure of the seller to prepare the goods or the failure of the seller to see the buyer’s carrying vessel, the buyer and seller must give each other adequate notice.
(4) When the goods are transported in containers, the seller usually transfers the goods to the carrier at the container terminal rather than on board the ship. It is not appropriate to use FOB terminology, but FCA terminology.
(5) After shipment, the seller must give the buyer a notice of shipment in time so that the buyer can go through the insurance formalities in time.
(6) According to INCOTERMS 2010, the risk limits of FOB, CFR and CIF terms were changed from “ship side” to “on board”, which is more in line with the actual operation of the business.