FOB conditions: Practical application
FOB Incoterm 2020, plays a decisive role in determining responsibilities and risks when goods move by sea. This not only creates transparency and efficiency in international trade but also demonstrates its importance in connection and coordination between related units. Let us explore in more detail FOB terms and its influence in global trade.
1.What is FOB Incoterm 2020?
FOB (Free On Board) is an international commercial term (Incoterm) on the transportation of goods. Under this clause, the seller is responsible for delivering the goods onto the buyer's vessel at the agreed port of export.
Once the goods are delivered on board, the buyer will bear the responsibility, costs and risks for the remainder of the shipping process. FOB terms are only used for inland waterway transport and sea transport.
2. Responsibilities of both buyers and sellers under FOB conditions:
According to Incoterm 2020, FOB terms include the following terms and obligations:
– Seller responsibilities:
+ Delivery of goods onto the buyer's ship at the agreed export port.
+ Bear the costs and risks until the goods are delivered over the ship's rail.
+ Provide documents related to goods.
+ Provide bill of lading (B/L) or equivalent document so the buyer can receive goods from the ship.
+ Support buyers in renting ships and booking cargo space (if necessary).
+ Notify the buyer about the time of delivery on board.
– Buyer responsibilities:
+ Payment for goods according to the contract.
+ Bear responsibility, costs and risks for the remainder of the transportation process after the goods are delivered over the ship's rail.
+ Rent a ship and book a place to transport goods.
+ Purchase freight insurance for the remainder of the shipping process.
+ Get the bill of lading (B/L) or equivalent documents from the seller to receive goods from the shipping company.
+ Pay costs related to importing goods such as import taxes, port fees, loading and unloading fees, etc.
+ Notify the seller about the time of receipt of goods from the ship.
3.What is FOB price? How to calculate FOB price:
FOB price is the price of the goods when delivered to the buyer's ship at the export port. FOB price includes the value of the goods and costs related to delivery on board, such as packaging fees, domestic transportation, export taxes, etc.
Recipe:
FOB price = Value of goods + Packing costs + Loading and unloading costs + Domestic shipping costs + Export tax
4.Benefits and risks of FOB terms:
- Benefit:
+ Clearly divide responsibilities, costs and risks between seller and buyer.
+ The seller is only responsible before delivering the goods onto the ship, while the buyer has the right to control the part after receiving the goods on the ship.
+ The seller can easily calculate the FOB price by adding the costs related to delivering the goods on board.
+ Buyers can easily compare FOB prices of different sellers to choose the seller with the most reasonable price.
- Risk:
+ The seller may have difficulty delivering goods to the ship if the export port is too far from the place where the goods were produced or the shipping service is poor.
+ Buyers may have difficulty receiving goods from the ship if the import port is too far from the place where the goods are consumed or the shipping service is poor.
+ The buyer may face the risk of loss or damage to the goods during transportation from the port of export to the port of import if they do not purchase insurance.
+ The buyer may encounter a difference between the time of transfer of responsibility, costs and risks between the two parties and the time of receipt of the bill of lading (B/L).
Above are some shares about Incoterm FOB 2020 conditions. If you have questions that need answering or need to transport import and export goods, please contact Macsco Logistics immediately with a team of many years of experience to Get the fastest and most accurate support.
For further information and questions, please contact:
MACSCO LOGISTICS LIMITED
Address: 64 Nguyen Dinh Chieu, Da Kao Ward, District 1, Ho Chi Minh City, Vietnam
Phone: (84 28) 6270 6576
Email: anna@macsclogistics.com
Website: https://macscologistics.com
