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Free on Board FOB



 

Maritime and Inland Waterway transport only

With  the Free on Board (FOB) Incoterms, Seller’s responsibility is engaged until goods are on board of the vessel in the specified port of shipment.

The seller must bear the pre-carriage costs and Terminal-handling costs (depending on the liner terms) of the shipping company.

In addition, the Seller is liable for export custom clearance formalities (might include export licence for instance).

In much the same way, the Buyer is liable for import customs clearance formalities (import licence, taxes and duties, VAT)

However any pre-shipment inspection required by law in the seller’s country, is at the seller’s expense.

Eventually, the buyer will be liable for main and post carriage transport costs as well as for terminal-handling charges (depending on the liner terms of the shipping company).

Usual Documents required:

  • Commercial Invoice
  • Documents as agreed in the contract
  • Proof of delivery (forwarder’s certificate of receipt)
  • Clean Bill of lading with the mention “Freight Payable at” (at named place) or “freight Collect” (at port of destination)

Upon request, the Seller may assist the Buyer for obtaining any documents needed for arranging the transport and the import clearance.

Note that the related costs engendered by such assistance are at the expense of the buyer.

When should I use the Free on Board (FOB) Incoterms rule?

Basically the Free on Board (FOB) Incoterms is recommended when the seller trades produces and raw materials (such as commodities for instance) and where he has an easy access to bulk cargo (dry or liquid).

However, for containerised goods usually handed over to the carrier before the loading aboard the vessel or at a Terminal, FOB is not fit for purpose and FCA should be considered instead.