TRADE TERMS: FREE ON BOARD (FOB)

The most commonly known trade terms are Incoterms, which are published by the International Chamber of Commerce. “ICC (International Chamber of Commerce) is the voice of world business championing the global economy as a force for economic growth, job creation and prosperity.”[1]

Free On Board (FOB) is an Incoterm. It is a trade terms that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays freight, insurance, unloading costs and transportation from the port of destination to his factory. The passing of risks occurs when the goods pass the ship's rail at the port of shipment.

… The seller delivers when the goods pass the ship's call at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport.[2]

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[1] International Chamber of Commerce, 'What is ICC?' <http://www.iccwbo.org> accessed 29 October 2010

[2] SourceJuice, 'Incoterms Definitions: the basics to the advanced' <http://www.sourcejuice.com/2008/07/15/incoterms-definitions-the-basics-to-the-advanced> accessed 29 October 2010