Under FOB terms, the seller bears costs and risks until the goods are loaded on board of the designated vessel.
The seller’s responsibility includes arranging export clearance. At the same time, the buyer pays the cost of marine freight, bill of lading fees and insurance. He is also responsible for unloading and local transportation costs from the port of arrival to the final destination.
Any damage to the goods when on board the vessel is the responsibility of the buyer.
For this reason, FOB is ideal for invoice financing solutions. This is because the risk of goods is transferred to the buyer once the goods are shipped.
Since Incoterm FCA was introduced in 1980, FOB should be used only for non-containerised sea freight and inland waterway transport.
However, FOB continues to be the most commonly – and incorrectly – term used for all modes of transportation. Despite the contractual risk that can result (which include the difficulty of checking goods if they are enclosed in a container).
