FOB Trade Terms
FOB Trade Terms
Detailed Explanation of FOB (Free On Board) Trade Terms
FOB (Free On Board, often translated into Chinese as “Free on Board at the Port of Shipment”) is one of the most commonly used price terms in international trade. It is clearly defined by the International Chamber of Commerce (ICC) in the International Commercial Terms (INCOTERMS® 2020). Its core purpose is to demarcate the responsibilities of the buyer and seller regarding the transportation of goods, the transfer of risk, and the bearing of costs.
FOB Core Definition and Application Scenarios
The essence of FOB is that risk transfers to the buyer once the seller loads the goods onto the buyer’s designated vessel at the designated port of shipment. Thereafter, all responsibilities and costs for transportation, insurance, and import customs clearance are borne by the buyer.
Application Scenarios
It applies only to ocean and inland waterway transport (such as container ships and bulk carriers). It does not apply to air, rail, or multimodal transport (for which terms such as FCA are used).