What is FOB in Sea Freight?
FOB stands for Free On Board, which means delivery on board the ship. According to Incoterms rules, the seller is responsible for delivering the goods to the port of shipment and loading them onto the ship. Once the goods pass the ship’s rail, all costs, risks, and responsibilities transfer from the seller to the buyer, who becomes responsible for subsequent costs and insurance.
Seller Responsibilities
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Covering costs and risks of transporting goods to the port of shipment
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Loading goods onto the ship
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Completing export procedures and customs clearance
Buyer Responsibilities
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Paying for sea freight from the port of shipment to the destination port
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Covering insurance costs and risk after loading on the ship
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Completing import procedures in the destination country
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Covering costs of unloading and reloading at the destination port
Why Use FOB?
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Clarity in responsibility: Clearly defines the point at which risk and cost transfer from seller to buyer
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Cost control for the buyer: Allows the buyer to manage costs and choose the most suitable shipping line and insurance
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Simplicity for the seller: After delivery to the buyer, the seller has no further responsibilities