Silk Bridge Journal

Definition

FOB (Free On Board) is an Incoterms® rule used for sea and inland waterway transport. Under FOB, the seller is responsible for delivering the goods to the agreed port of shipment, completing export formalities, and loading the goods onto the vessel nominated by the buyer.

The risk transfers from the seller to the buyer once the goods have been loaded on board the vessel. From that point onward, the importer is responsible for the remaining transportation, ocean freight, cargo insurance, and other costs associated with delivering the goods to their destination.

Why Should Importers Know This?

FOB is one of the most commonly used Incoterms® rules when importing from China and other Asian markets. One of its main advantages is that the importer can arrange the international transportation independently, giving them greater control over freight costs and allowing them to choose their own freight forwarder.

However, it is important to understand that FOB does not mean that the seller is responsible for the goods until they arrive in Europe. The risk transfers to the buyer once the goods are loaded onto the vessel.

Related Terms

Incoterms® · CIF · EXW · DDP · Freight Forwarder · Bill of Lading · Landed Cost

In Practice

FOB can be a very attractive option for importers who want greater control over transportation and logistics costs. Before choosing this rule, however, it is worth calculating the total cost of importing the goods rather than looking only at the purchase price.

FOB is one of the fundamental rules every importer should understand well – incorrect arrangements concerning costs and risk can have a significant impact on the profitability of the entire order.