Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated. The point the goods are safe aboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.
FOB is the most common agreement between an international buyer and seller when shipping cargo via sea. This Incoterm only applies to sea and inland waterway shipments.
What are the Seller’s Responsibilities?
When entering into a sales contract with the Incoterms of FOB, the seller assumes the following responsibilities:
Export Packaging: Arranging all export packaging so the cargo can be shipped safely.
Loading Charges: Any expenses incurred during the loading process at the seller’s warehouse.
Delivery to Port: Trucking fees incurred while moving the cargo from the warehouse to the port of loading.
Export Duty, Taxes & Customs Clearance: Ensuring the cargo is exported correctly.
Origin Terminal Handling Charges: The seller is responsible for OTHC.
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Loading on Carriage: The seller is responsible for the costs incurred to load the cargo onto the carriage. What are the Buyer's Responsibilities?
When a buyer agrees to purchase goods under the Incoterms of FOB, they consent to the following responsibilities and risks:
Freight Charges: Carriage charges to ship the cargo from the port of loading to the destination.
Insurance: Under FOB, freight insurance is not a requirement; however, it is the buyer’s decision if they would like to purchase an insurance policy for their shipment.
Destination Terminal Handling Charges: The buyer is responsible for DTHC.
Delivery to Destination: Once the cargo is unloaded from the carriage, the buyer is responsible for the final carrier fee to deliver the load to their destination.
Unloading at Destination: In the event of any expenses incurred during the unloading process at the buyer’s warehouse, the buyer is responsible.
Import Duty, Taxes & Customs Clearance: The buyer is responsible for all taxes and fees associated with customs clearance. In the event of dunnage, penalties, or delays, the buyer must cover the charges and risks associated with it.
