• FREE ON BOARD [... named port of shipment]
  • FREE ON BOARD [... named port of shipment]
This term is to be used only for sea or inland waterway transport.
FOB-Incoterms-2010-VINCULUM- Customs clearance Vladivostok-GK-IMPORT40Factory or warehouse manufacturer or sellerDelivery from the factory or warehouse to the departure terminalPlacement of goods on the cargo terminalPlacing goods on boardState borderSea transportation to the port of dischargeAccommodation at the temporary storage at the port of arrival (unloading)Delivery of goods ready for unloading from the vehicleConsignee WarehouseThe cost zone and the responsibility of the buyer when FOBSeller’s cost and responsibility area for FOBMoment of risk transfer when FOB!

"Free on Board"(" Free on board ") means that the seller delivers product on board a vessel nominated by the buyer at the named port of shipment, or ensures the delivery of the goods so delivered. Risk loss of or damage to the goods passes when the goods are on board the vessel, and from that moment the buyer bears all costs .

The seller must deliver the goods either on board, or ensure that the delivered goods in such a way for shipping. Pointing to the obligation to "provide" takes into account the numerous sales chain, which are used frequently in commodity trading.

It is advisable to use these conditions in the following cases:

  • the seller can with minimal cost and risk to transport the goods and load it on the ship;
  • buyer plans to ship cargo intermodal transport using one line;
  • the buyer leases the whole ship or orders a charter flight;

For example, in the south of Russia large agrarian enterprises on conditions FOB export cereals, cereals in bags or in bulk. In announcements of the sale of goods, such enterprises often indicate the port of Novorossiysk and Astrakhan as a place of loading on board the ship. On terms FOB coal is exported regularly from Russia abroad, wood, scrap metal and other products.

FOB may not be appropriate when the goods are handed over to the carrier prior to being placed on board the vessel, for example, goods in containers, which is typical for delivery to terminal. In such situations, it is advisable to use the term FCA.

FOB requires the seller to perform customs formalities for export, if applicable. However, the seller is not obliged to carry out customs formalities for import, pay import duties or perform other customs formalities for import. 

Learn what you need to do when choosing FOB Close the list of actions for FOB
  • to clarify in detail the parameters and characteristics of the packages (including labeling), this is necessary for the subsequent customs clearance of goods;
  • find out the seller’s shipping options;
  • agree with the seller on the type of vehicle, the volume of goods ready for loading (especially if contract long-term supply, and deliveries are made in batches under one contract);
  • take into account the peculiarities of cargo transportation (in the case of dangerous goods);
  • clearly agree with the seller the place of transfer of goods;
  • notify the seller where and when it is necessary to deliver the goods;
  • agree with the insurance company the terms of insurance, if necessary (Insurance for FOB - area of ​​responsibility of the buyer);
  • ensure timely acceptance of the placement of cargo on board the ship;
  • provide the Seller with full information in advance about the specific carrier, vehicle (for processing customs and transport documents);
  • obtain permits, if necessary;
  • pay customs charges for importing goods;
  • to carry out customs clearance of goods;

Of course, this list is not complete and depends on the specific case, but, under these delivery conditions, the buyer's logisticians can prove themselves most influential and bring additional profit using intermodal transportation.

 

 

1. General obligations of the seller and the buyer under the conditions FOB

A.1.The seller is obliged, in accordance with the contract of sale, to provide the buyer with the goods, the commercial invoiceinvoice, as well as any other proof of compliance of the goods with the terms of the contract of sale, which may be required under the terms of the contract.
Any document referred to in paragraphs A1-A10 may be replaced by an equivalent electronic record or procedure if agreed by the parties or is common.
V.1. The buyer must pay the price of the goods, as provided for in the contract of sale.
Any document referred to in paragraphs B1-B10 may be an equivalent electronic record or other procedure, if agreed by the parties or is common.

2.Licenses, permits, security controls and other formalities under the conditions FOB

A.2.If required, the seller must, at his own expense and risk, an export license or other official authorization and carry out all customs formalities necessary for the export of goods.
V.2.If required, the buyer must obtain at his own expense and risk import license or other official authorization and carry out all customs formalities for the import of goods and its transportation through any country.

3. Contracts of carriage and insurance under conditions FOB

A.3.a) Contract of carriage
The seller no duty to the buyer under the contract of carriage. However, at the request of the buyer or if it is commercial practice and the buyer does not give timely instructions to the contrary, the seller may be at the expense and risk of the customer contract for carriage on usual terms. In any case, the seller may refuse to conclude a contract of carriage, without delay, by notifying the buyer.
b) Contract of insurance
The seller no duty to the buyer under a contract of insurance. However, the seller must provide the buyer, at his request, at his risk and expense (if any costs), the information necessary for the buyer of insurance.
V.3.a) Contract of carriage
The buyer shall at his own expense for the carriage of the goods from the named port of shipment, except in cases where the contract of carriage is the seller, as described in paragraph A3 a);
b) Contract of insurance
The buyer has no obligation to the seller to conclude a contract of insurance.

4. Delivery and acceptance of goods under conditions FOB

A.4.The seller must deliver the goods, or by posting on the board, nominated by the buyer at the point of loading, if any, specified by the buyer at the named port of shipment, or by ensuring the provision of such goods supplied. In this and in another case, the seller must deliver the goods on the date or within the agreed period, in accordance with the customs of the port.
If a particular point of loading is not specified by the buyer, the seller may select the named port of shipment and the item that best suits his purpose.
V.4.The buyer must take delivery of the goods as soon as they have been delivered in accordance with paragraph A4.

5. Transfer of risks under conditions FOB

A.5.Seller shall bear all loss or damage to the goods until it is delivered in accordance with paragraph A4, with the exception of the risks of loss or damage in the circumstances referred to in paragraph B5.
V.5.Buyer assumes all risks of loss or damage that may occur from the date of delivery in accordance with paragraph A4.
If:
a) the buyer does not report the name of the ship in accordance with paragraph B7 or
b) the vessel nominated by the buyer fails to arrive on time so that the seller could act in accordance with paragraph A4, unable to take the goods, or closes for cargo earlier time, which has been reported in accordance with paragraph B7;
buyer bears all risks of loss or damage to the goods: 
i) the agreed date, if no agreed date, 
ii) of the notification made by the seller in accordance with paragraph A7 within the agreed period, and if this was not the notified period, 
iii) the expiry date within the agreed delivery period, 
provided that the goods were explicitly individualized as a commodity, which is the subject of the contract.

6 Allocation of costs under conditions FOB

A.6.The seller must pay:
  • all expenses related to the goods until the time of delivery in accordance with paragraph А4, except for expenses paid by the buyer, as provided for in paragraph Б6;
  • if necessary, the cost of the customs formalities to be paid for the export of goods, as well as any duties, taxes and other expenses paid upon export.
V.6.The buyer must pay:
  • all expenses related to the goods from the moment they are delivered, as provided for under A4, except, if necessary, the costs of completing customs formalities for exporting the goods, as well as all taxes, duties and fees payable upon exporting the goods as provided for A6 b);
  • all additional costs incurred as a result of the buyer's failure to provide proper notice in accordance with clause B7, or the fact that the vessel nominated by the buyer did not arrive on time, or was unable to accept the goods, or stopped accepting the goods before the time specified in clause B7, provided that the product has been explicitly individualized as the subject of the contract;
  • if necessary, all expenses related to the payment of taxes, duties and other official charges, as well as the fulfillment of customs formalities payable when importing goods, and the costs of transporting it through any country.

7.Notification to buyer and seller under conditions FOB

A.7.The seller must, at the expense and risk of the buyer to give him adequate notice or that the goods have been delivered in accordance with paragraph A4, or that the ship is not taken at the agreed time.
V.7.The buyer must give the seller adequate notice of the vessel name, loading point and, if necessary, of a favorite time of delivery within the agreed period.

8.Documentary proof of delivery under conditions FOB

A.8.Seller shall, at its own expense provide the buyer with the usual proof that the goods have been delivered in accordance with paragraph A4.
If such evidence is not a transport document, the seller shall at the request of the buyer's expense and risk, to assist him in obtaining a transport document.
V.8.The buyer must accept the proof of delivery provided as envisaged in paragraph A8.

9.Checking, packaging, labeling and inspection of goods under conditions FOB

A.9.The seller must pay all costs associated with checking (checking quality, measuring, weighing, counting) which are necessary for the delivery of goods in accordance with paragraph A4, as well as the costs of inspection of goods before shipment, which is prescribed by the authorities of the exporting country.
The seller must, at his own expense, ensure the packing of the goods, unless it is customary in the industry to ship the goods specified in the contract in unpacked packaging. The seller may pack the goods in such a way as is necessary for his transportation, unless the buyer informs the seller about the specific packaging requirements before entering into the contract. Marking packaged goods must be properly implemented.
V.9.The buyer must pay the costs for the mandatory inspection of goods prior to shipment, except when such inspection is carried out by order of the authorities of the exporting country.

10. Assistance in obtaining information and related costs under the conditions FOB

A.10.If need be, the seller is obliged to provide the purchaser or to assist him in obtaining, at the request of the buyer, at his risk and expense, documents and information, including safety information, which may require the purchaser to import goods and / or transportation to the final destination.
Seller shall reimburse Buyer for all costs and charges incurred by the buyer upon receipt or assistance in obtaining documents and information as provided in paragraph B10.
V.10.The buyer must notify the seller in a timely manner the requirements with regard to safety information, so that the seller could act in accordance with paragraph A10.
The buyer must reimburse the seller incurred by him costs and charges for providing or rendering assistance in obtaining documents and information as provided for in paragraph A10.
If required, the buyer is obliged to provide the seller or facilitate in the seller receiving, at the request of the seller, at his risk and expense, documents and information, including important safety information, which may require the seller to transport, export of goods and for their transport through any country.
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