What does Free On Board (FOB) mean? ID&T Importers / Exporters guide.

Free On Board (FOB)

FOB - named port of shipment.

"Free On Board" means that the seller delivers when the goods pass the ships rail at the named port of shipment. This means that the buyer has to bear all the costs and risks of loss or of damage to the goods from that point. (Official INCOTERM).

Selling goods on a FOB basis enables the seller to get paid quicker as your responsibility ends once cargo is loaded onto ship or aircraft. From the date shown on the Bill of Lading or the Airway Bill the goods are the responsibility of the buyer.

On arrival at destination the buyer is responsible for all costs including unloading. If the buyer wishes to have cargo insured while in transit it is the buyers responsibility also.

As a buyer the benefit of buying FOB is that you control the shipping costs and you can determine the mode and routing of transport to ensure goods arrive when required and at a known price.

Importing

Establish a relationship with new supplier.
Confirm terms of trade. Most popular are FOB or CIF.
Agree payment terms ie deposit balance on receipt of goods/documents
Approve samples.
Place an order with new supplier in writing. Confirming the exact order, trade terms and advise all documents you need.
Appoint your freight forwarder / custom broker.

Exporting

Establish a relationship with new buyer.
Confirm terms of trade. Most popular are FOB or CIF.
Agree payment terms for deposit; balance on receipt of goods/documents.
Have samples approved.
Receive an order with new buyer in writing. Confirming the exact order, trade terms and agree all documents you will provide.
Appoint your freight forwarder.