What is the FOB Incoterm
In ocean freight, the FOB Incoterm, or “Free on Board”, is an Incoterm exclusive to shipping. It states that the seller must load the goods onto the ship chosen by the buyer. The seller is also responsible for all costs and risks up until all goods are loaded onboard the vessel, at which point the risks are transferred to the buyer.
The FOB Incoterm is similar to the FCA Incoterm, the only difference being the risk transfer point upon complete loading of goods is not specifically mentioned in the FCA Incoterm.
Seller’s obligations under the FOB Incoterm
- Delivery of goods and documents required
- Packaging and wrapping
- Inland transportation in the country of origin
- Customs at origin
- Exit charge
Buyer’s obligations under the FOB Incoterm
- Cost of the goods
- International freight
- Arrival expenditures
- Customs upon arrival
- Inland transportation in the destination country
- Payment of fees
FOB or CIF when importing from China?
The two most-commonly used Incoterms when importing from China are the FOB and CIF (Cost, Insurance and Freight) Incoterms.
Under FOB, as an importer, you are responsible for the booking, payment, and management of the ocean freight shipment. On the other hand, under CIF, the exporter, or seller, will be responsible for them.
This may seem to be an advantage for the importer, but if you still have yet to establish a trusting relationship with your provider, it could become a big risk. We recommend you to give our article on why you should choose FOB and not CIF when importing from China a read.