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What is FOB – Free on Board (named port of shipment) ?

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What is FOB?

FOB – Free on Board (named port of shipment)

Under FOB Incoterms the seller is responsible for all costs and risks until the goods are loaded on board the vessel at the named port of shipment. 

The seller's responsibility does not end at that point unless the goods are "appropriated to the contract" or "clearly set aside or otherwise identified as the contract goods".

Because of this FOB contract requires the seller to deliver goods on board a vessel designated by the buyer as customary at the port in question. The seller is responsible for arranging  export clearance. 

The buyer is responsible for the cost of ocean freight transportation, bill of lading fees, insurance, unloading and door delivery. 

FOB should only be used for non-containerized ocean freight however it is often used for incorrect modes of transport. This introduces contractual risks. The proper Incoterm for other modes of transport is FCA (introduced in 1980 version of Incoterms).

Tags: incoterms

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