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Trade Knowledge

Trade Terms-FOB

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Delivery on board the port of shipment(... designated port of shipment) means that the seller must deliver the goods to the ship designated by the buyer within the specified port of shipment period specified in the contract. And bear all expenses and risks of loss of or damage to the goods until they have crossed the ship's rail. FOB is also known as "FOB".
According to the 1990 General Principles, under FOB terms, the main obligations of the buyer and the seller are as follows:

(1) the main obligations of the seller:
1. Responsible for the delivery of goods conforming to the contract to the ship designated by the buyer in the usual manner at the designated port of shipment on the date or period specified in the contract, with adequate notice to the buyer;
2. Responsible for processing the export of goods, obtaining an export licence or other authorization;
3. bear all costs and risks for the goods until they have crossed the ship's rail at the port of shipment;
4. Responsible for the provision of commercial invoices and the usual documents evidencing the delivery of the goods to the ship. If the seller and the seller agree to use electronic communications, all documents can be replaced by EDI information with equal effect.


(2) the main obligations of the buyer:
1. Responsible for the payment of the price as stipulated in the contract;
2. Be responsible for chartering or booking, paying freight and giving adequate notice to the seller of the name of the ship, the place of shipment and the time required for delivery;
3. Obtain import licences or other authorizations on the basis of risk and expense, and carry out all customs formalities for the import of goods and, if necessary, transit through another State;
4. bear all costs and risks of the goods after they have crossed the ship's rail at the port of shipment;
5. Receive the goods delivered by the seller in accordance with the terms of the contract and accept documents conforming to the contract.

With FOB terminology, the following points should be noted:
1. The Buyer shall promptly charter the vessel for booking and inform the Seller of the name, place and time of the shipment in time so that the Seller may prepare the goods in time for shipment. Failure to do so would constitute a breach of contract by the buyer. This may result in the seller claiming the cancellation of the contract and/or damages.
2. The burden of shipping expenses is expressed in FOB terms. Common are:
FOB liner terms means that the shipping costs are borne by the party paying the freight(ie, the buyer) as if they were shipped by a liner
FOB hook delivery(FOB under hook) means that the seller places the goods within the reach of the ship hook, and the loading cost from the start of the goods is borne by the buyer;
FOB includes FOB cabin(FOBS), which means that the seller is responsible for loading the goods into the cabin and paying the shipping expenses including the cabin fee
FOB includes FOB deck(FOBT), which means that the seller is responsible for loading the goods into the cabin and paying the loading fee including the flat cabin fee.


3. The United States 'interpretation of FOB terms differs from that of 1990 incoterms. The United States divides FOB terms into six categories, of which only "FOB shipped on board" is similar to the 1990 INCOFERMS interpretation. Therefore, When negotiating import business in FOB terms with exporters from the United States and other American countries, our foreign trade enterprise shall, in addition to specifying "vessel" after FOB terms, expressly state that the other party(seller) is responsible for obtaining an export license. And pay all export taxes and fees.

Related Product tags: Trade Terms,FOB,Interpretation,basic,international trade terms



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