FOB (Free on Board) is one of the most widely used Incoterms (International Commercial Terms) in global trade, particularly in maritime transactions. It clearly defines the point at which responsibility and risks transfer from the seller to the buyer, making it a popular choice for shipments by sea or inland waterway. In this blog post, we’ll explain FOB, how it works, and provide practical examples to help you optimize your trade operations.
FOB, or Free on Board, specifies that the seller is responsible for delivering goods onto the buyer’s designated vessel at the named port of shipment. The risk and cost transfer to the buyer once the goods are loaded onto the ship.
In simple terms:
Advantages for the Seller:
Advantages for the Buyer:
Disadvantages for the Buyer:
Here’s a step-by-step process for an FOB transaction:
Example 1: Textile Shipment from Bangladesh
Example 2: Electronic Components from China
Example 3: Grain Export from the U.S.
If FOB doesn’t align with your shipping needs, consider these alternatives:
FOB (Free on Board) is a practical and efficient Incoterm for maritime trade, offering buyers greater control over transportation while clearly defining the seller’s responsibilities. By understanding its terms and processes, both buyers and sellers can ensure smooth and successful transactions in international trade.
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