What is FOB?
Free on Board or FOB is Incoterm and is a sea shipping term, which means the seller is responsible for loading the purchased goods onto the ship and all associated costs. When the goods are safe on board, the risk passes to the buyer, who is responsible for the rest of the transport.
As long as the seller delivers the goods to the carrier designated by the buyer at the designated place and handles the export customs clearance procedures, the delivery will be completed. The choice of place of delivery has an impact on the obligation to load and discharge goods at that place. If the place of delivery is the place of the Seller, the obligation to deliver is deemed to have been fulfilled when the goods are loaded on a means of transport provided by a carrier nominated by the Buyer or by another person acting on behalf of the Buyer; Otherwise, the obligation of delivery shall be deemed to have been fulfilled when the goods are on the means of transport of the Seller and have not yet been discharged into the care of a carrier or other person designated by the Buyer, and the Seller shall not be responsible for discharging the goods.
FOB is the most common agreement between international buyers and sellers when shipping goods. Used to indicate whether the seller or buyer is responsible for goods damaged or destroyed during transit. This Incoterm is only applicable to sea and inland waterway transport.
What are the buyer’s obligations to FOB?
When the Buyer agrees to purchase the goods in accordance with FOB Incoterms, they agree to assume the following responsibilities and risks:
Freight: The cost of transporting goods from the port of loading to the destination.
Insurance: under FOB, freight insurance is not necessary; However, if they want to buy an insurance policy for their goods, it is up to the buyer.
Destination Terminal fee: Buyer is responsible for DTHC.
Delivery to the destination: After the goods are discharged from transit, the buyer is responsible for the final carrier’s cost of transporting the goods to the destination.
Discharging at destination: Any expenses incurred during discharging at the buyer’s warehouse shall be borne by the buyer.
Import duties, taxes and customs clearance: The buyer is responsible for all taxes related to customs clearance. In the event of padding, penalties, or delays, the Buyer shall bear the costs and risks associated therewith.
What are the obligations of the seller to FOB?
When signing the sales contract with FOB Incoterms, the seller shall bear the following responsibilities:
Export packing: Arrange all export packing so that goods can be transported safely.
Loading charges: any charges incurred during loading at the seller’s warehouse.
Shipping to port: Freight charges incurred when moving goods from the warehouse to the port of loading.
Export duties, taxes and customs clearance: ensure goods are exported correctly.
Origination commission: Seller is responsible for OTHC.
Loading: The seller is responsible for the cost of loading the goods onto the car.
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