What are Incoterms?

Before explaining each individual Incoterm, we first need to get to grips with what Incoterms actually are. Simply put, ‘Incoterms’ are International Commercial Terms, 11 rules for the purpose of making who is responsible for what during an international transaction crystal clear. Accepted globally and becoming a requirement in international trade, they take out the risk of a “lost in translation” misunderstanding and in 3 simple letters (bar the odd caveat) it pinpoints exactly where the burden of responsibility lies and transfers from buyer to seller regarding the costs, jobs and risks involved. It leaves little to no room for confusion and every party involved knows exactly where they stand.

Today we look at FOB…

FOB

FOB – Free on Board

FOB is about the most even balance of bearing responsibility between the seller and buyer. The goods are effectively considered to be delivered once they are on board the ship. The seller must cover all costs up until that point, including export clearance. The buyer covers all other costs, such as marine freight transportation, insurance, bill of lading fees, unloading and final transportation costs once the goods have reached the port of destination.

Transfer of risk

Once goods have been delivered onboard the vessel