What is the FOB Incoterm?
The FOB Incoterm is a widely used Incoterm that stands for "Free on Board." It is one of the most widely used Incoterms in international trade and it defines the obligations and responsibilities of the buyer and seller regarding the delivery of goods.
The FOB Incoterm provides that the seller is responsible for the goods until they are loaded onto the transport vessel. At that point, the buyer assumes responsibility for the goods, including bearing all costs and risks of shipment. This Incoterm is often used for shipments transported by sea, rivers or other inland waterways.
It is important to note that the FOB Incoterm refers only to delivery at the port or point of shipment, and not to the destination or point of delivery. Understanding the FOB Incoterm and other Incoterms is crucial for importers and exporters to ensure clear communication and avoid misunderstandings or disputes during the international trade process.
What are the advantages and disadvantages of the FOB Incoterm?
One of the main advantages of using the FOB Incoterm is that it provides clarity about where responsibility lies for the goods being shipped. It is also convenient because it allows the buyer to choose their own transportation company, which is often more advantageous than the seller's company.
However, one of the disadvantages of the FOB Incoterm is that it places a heavier burden on the buyer to arrange shipping and insurance for the goods. In addition, the seller may have limited control over the shipping process, which can lead to delays or other problems. Overall, the FOB Incoterm can be an effective solution for international trade, but it is important to understand the pros and cons before deciding whether to use it in a particular situation.
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Frequently asked questions about the FOB Incoterm:
What costs are included with FOB?
Costs typically included with FOB include the cost of transporting the goods to the port of departure, the cost of loading the goods onto the ship, and export customs documentation fees. All costs after loading the goods onto the ship, including ocean freight charges, import duties and local charges in the destination country, are the responsibility of the buyer.
Who is responsible for obtaining transportation insurance from FOB?
With FOB, it is usually the buyer's responsibility to purchase transportation insurance to protect the goods during international transportation. The seller bears responsibility for the goods until they are loaded aboard the ship.
What is the difference between FOB and CIF?
The main difference between FOB and CIF (Cost, Insurance, and Freight). is that with CIF, the seller is responsible for obtaining transport insurance for the goods, whereas with FOB, this responsibility lies with the buyer. At CIF the cost of insurance is included in the agreed price, whereas with FOB the cost of insurance must be arranged separately by the buyer.
