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Incoterms – FOB
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Incoterms – FOB

FOB (Free on Board) means that the seller fulfils his obligation to deliver when the goods have passed over the shop’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.

The FOB term requires the seller to clear the goods for export.

Also it is expressed as being Monomodal and it can only be used for transactions where sea freight is the main carriage. Therefore, as an INCOTERM, there is no application for FOB in road, rail or air transport.

For FOB to apply, the seller must be in the physical position of load the cargo over the rail under their own direct control i.e. the loading is undertaken by the seller’s own labour, or by an agent that is under the contractual control of the seller. Further his process would have to be monitored by both the seller and buyer or their representatives.

Generally, from the modern deep-sea export perspective, this control often cannot be achieved as the seller is either not allowed into the harbour area or, even in those extreme circumstances where they are, they have no influence over the party loading the vessel.

The INCOTERM FOB still has an application in some markets, but these are more and more in the minority. Note that the use of an ‘on-board’ Bill of Lading or mate’s receipt could be appropriate in recording the passage risks under FOB making FOB one of the few terms still unavoidably dependant on such documents.