Incoterm FOB 2020

January 08 2024

The Incoterm FOB 2020 Free on Board or “on board” is the most used term at a commercial level.

Coming from the era of transportation by sailing boats, it is used for sales operations in which the transportation of merchandise is carried out by boat, whether sea or river. The FOB Incoterm should always be used followed by the name of the loading port. FOB is one of the most used incoterms.

 

Responsibilities in the FOB Incoterm

 

According to the rules of Incoterms 2020, and even in previous versions thereof, the seller must place the merchandise on board the ship that the buyer selects. It is at that moment when the responsibility for loss or damage to the merchandise falls directly on the buyer.

Incoterm 2020 Fob Free On Board, or “On board” is not defined as placing the goods “on top of the deck of the ship” or with any similar expression, since everything will depend on what is established in the contract according to the type merchandise in question.

In addition, the cost of transportation is assumed by the buyer. This is because the cargo invoice is usually indicated as “freight collect.” The seller will thus carry out all the export procedures, while the buyer will take care of the import procedures.

However, the use of the incoterm 2020 FOB “Free On Board” is inappropriate when the merchandise is transported in containers, since the cargo is delivered to the carrier in a place at a certain distance from the port, such as a container yard or even the facilities of the port. seller.

 

 

Obligations of the seller under the FOB incoterm

 

  • Supply merchandise and invoice as specified in the contract.
  • Dispatch the export goods, requesting and obtaining the corresponding permits, and paying the taxes and duties required.
  • Deliver the merchandise on board the ship arranged by the buyer at the agreed port.
  • The buyer is responsible for the risks and costs related to the goods until delivery to the ship.
  • Provide assistance to the buyer at his expense in obtaining documents necessary for importation or arranging insurance.

 

Obligations of the buyer under the FOB incoterm

 

  • Pay the price as specified in the sales contract.
  • Clear the merchandise for import, and obtain the relevant authorizations and licenses, while paying the necessary duties and taxes.
  • Accept the delivery of the merchandise if it is carried out as agreed.
  • Bear the risk of loss or damage to the merchandise from the moment it is on board the ship or from the expiration of the date agreed with the seller for reasons beyond the control of the latter (that the ship selected by the buyer does not dock on time, for example ).
  • Pay the costs from delivery on board the ship.

 

Advantages and disadvantages of the FOB Incoterm

 

  • Advantages. For many sellers and buyers, it is one of the most used alternatives in this type of transportation, especially because it allows greater control of the process and the related costs that correspond to each of the parties in the contract.
  • Disadvantages. Unfavorable conditions occur especially for importers or exporters who are not familiar with processes or experienced in exporting. If this is the case, other examples such as the CIF Incoterm may be more convenient for your first international purchases.

For more information about Incoterms 2020 or to request a quote for your international shipments, contact us and we will answer all your questions.