What is FOB Incoterms (Free On Board)
FOB Incoterms is one of the most commonly used trade terms in international trade as mentioned on the 8 common you should know. FOB stands for “Free On Board” or “Freight On Board”, depending on the context in which it is used. This trade term is used when the goods are being transported by sea and is commonly used when importing goods from overseas. If you are in Nigeria, you will find FOB incoterms for Nigerian Business useful.
What does FOB mean?
When goods are sold under FOB Incoterms, it means that the seller is responsible for the goods until they are loaded onto the shipping vessel. Once the goods are loaded, the responsibility shifts to the buyer. The buyer is responsible for all costs and risks associated with the transportation of the goods from the port of origin to the port of destination.
1. What are the seller’s obligations under FOB terms?
Under FOB Incoterms, the seller is responsible for loading the goods onto the shipping vessel at the port of origin. The seller is also responsible for obtaining all the necessary export documentation and clearing the goods for export. This includes obtaining any necessary permits or licenses required to export the goods from the country of origin.
What are the buyer’s obligations under FOB terms?
The buyer is responsible for all costs associated with the transportation of the goods from the port of origin to the port of destination. This includes the cost of shipping, insurance, and any fees associated with the importation of the goods into the destination country. The buyer is also responsible for obtaining all necessary import documentation and clearing the goods through customs.
2. Advantages of FOB
FOB Incoterms offers several advantages to both buyers and sellers. For buyers, FOB Incoterms offers greater control over the shipping process and allows them to choose their preferred shipping method and carrier. For sellers, FOB Incoterms reduces their risk and liability by shifting the responsibility for the goods to the buyer once they are loaded onto the shipping vessel.
3. When to use FOB
FOB Incoterms are typically used for sea freight shipments. It is recommended to use FOB Incoterms when importing goods from overseas as it provides greater control over the shipping process and reduces the seller’s liability. However, it is important to consider the overall costs associated with shipping and ensure that the chosen shipping method and carrier are reliable and cost-effective.
Conclusion
FOB Incoterms is a popular trade term used in international trade when goods are being transported by sea. It is important to understand the obligations of both the buyer and seller under FOB Incoterms and to carefully consider the overall costs associated with shipping before selecting this trade term.
References
The International Chamber of Commerce (ICC): https://iccwbo.org/
Incoterms 2020: https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/
Freightos: https://www.freightos.com/
The Balance: https://www.thebalance.com/free-on-board-fob-what-does-it-mean-1953588