FOB - FREE ON BOARD DELIVERY TERM


FREE ON BOARD DELIVERY TERM

FOB / Free On Board Delivery Term

Mostly known: Free On Board, FOB, Delivery on board
FOB incoterm is the most frequently used form of delivery in sea shipments It is the wellknown delivery term in 11 different delivery modes in incoterms.

Free On Board, FOB

In the form of FOB delivery, the exporter company delivers the loaded container to harbour on requested date. For example, if the delivery term in the contract or in the proforma invoice is specified as "FOB .... city Port"  The importer (buyer) company organize the seaway shipment and let exporter (seller) known about the shipment date. Both parties agreed a spesific loading date. Then importer company give exporter contact details to his transporter company and transporter company contact with exporter company to arrange the loading date. The exporter company is obliged to complete the container loading in their facility and arrange the inland transportation to reach the container to harbour and let it ready to ship on board. 


FOB, Free On Board Price How to Calculate

When calculating the FOB price, the vendor, ie the exporter, adds the profit share on the cost of the product and also add the expenses of the inland transportation cost, (carrying the container from his facility to harbour) harbour costs and customs clearance costs. In this way the FOB price is determined.

FOB Price Calculation: Product cost + profit share + packaging costs + loading in factory + inland transportation + port charges + customs expenses

FOB Delivery Term: How it works

According to the FOB delivery type, the seller is responsible for loading the container, carrying the container to port and pay the port charges. All risks till the container loaded on board, belong to the exporter (seller) company. So exporter's responsibility continue until the freight is loaded on the ship's deck, including the port costs. It is also obliged to carry out customs procedures.


Buyer and Seller's Responsibilities as FOB Delivery:

Seller (Exporter) responsibilities FOB delivery Term
  • The seller load the container in his own facilities, 
  • Organizes the inland transportation to reach container to harbour, 
  • Ensures that the cargo is loaded to the ship on time 
  • Complete the customs clearence


Buyer (Importer) responsibilities FOB delivery Term
  • The buyer's responsibilities start when container loaded on ship
  • Insurance; covering all risks till the goods reach to buyer's facilities
  • The buyer company should handle the shipment costs
  • Customs clearance at destination point (in buyer's contry)
  • Inland transportation from destination port to buyer's facilities

FOB, FOB DELIVERY TERM

The FOB delivery term can only be used for maritime and river shipments.

The seller (exporter) company  should prepare the documents including: invoce, packing list, certificate or origin. Exporter company also should finish the customs clearence process

The seller (exporter) company obligated to give all necessary information to carrier company to prepare the consignment note (bill of lading) and also check and confirm the draft of bill of lading. 

The seller (exporter) company also obligated to send the original documents to buyer's (importer) company with the courier when the shipment done and all process completed.


When agree on FOB delivery term, The port city should be clear and both parties check which port is the best option for both company. The buyer may indicate the port of a different city from the city where the buyer is located. Since the internal transportation costs belong to the seller, this detail should not be omitted.

FOB Delivery Term:  Seller & Buyer Responsibilities


details FOBCostsRisks
PackagingSeller ie exporterSeller ie exporter
Internal shipment (to the harbour)Seller ie exporterSeller ie exporter
Customs clearenceSeller ie exporterSeller ie exporter
Port Loading (handling charges)Seller ie exporterSeller ie exporter
Shipment (main shipment charges)Buyer ie importerBuyer ie importer
InsuranceBuyer ie importerBuyer ie importer
Port Unloading at destination (handling)Buyer ie importerBuyer ie importer
Customs clearence at destinationBuyer ie importerBuyer ie importer
Internal shipment at destinationBuyer ie importerBuyer ie importer
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usatradevisa: FOB - FREE ON BOARD DELIVERY TERM
FOB - FREE ON BOARD DELIVERY TERM
In the form of FOB delivery, the exporter company delivers the loaded container to harbour on requested date. For example, if the delivery term in the
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