FOB Incoterm

Commerce

The FOB (free on board) incoterm is a type of incoterm in which the selling party, in a sale, is responsible for the costs incurred until the merchandise is deposited at the point of departure.

Being one of the most widespread practices in the field of international trade, the FOB incoterm is configured as a modality that distributes risks and costs between the buying and selling parties of merchandise.

The International Chamber of Commerce is the organization in charge of establishing the different types of incoterms that exist in the day-to-day world trade. Free on board is one of the most recurrent examples among them and its use is widespread in part thanks to the advantages it offers in relation to lower levels of risk distributed among parties related to operations.

The acronym in English of this concept (free on board) refers to the nature of this type of commercial agreement. In this way, the seller takes care of the merchandise from its origin to its delivery at the port of origin or departure.

From that moment on, the buyer is responsible for the transported good in terms of expenses related to its insurance, transport and commercial rates.

Implications of the FOB incoterm

Purchase and sale operations carried out through FOB-type commercial agreements will have some characteristic points to be highlighted especially:

  • The seller is responsible for transporting the merchandise to the port of departure, assuming the expenses corresponding to that phase of the operation. These range from its production and packaging to its transport to the shipping point chosen by the plaintiff.
  • Once the good is deposited in port, this responsibility is transferred to the buyer, thus dividing the degree of economic responsibility in the operation between both parties. Likewise, it will take care of the costs of international transport and insurance coverage contracted against the dangers of loss or damage.
  • Official costs in the form of duties and customs will be shared as well. In this way, sellers are responsible for the rates of the point of departure and buyers of those corresponding to the point of final destination.
  • Exclusive use of operations carried out in the maritime environment.

Tags:  administration passes Business 

Interesting Articles

add