I. Free on board price (FOB)
Free on Board (FOB) is one of the terms commonly used in international trade.
The seller’s basic obligation is to load the goods on board the vessel designated by the buyer at the port of shipment and within the time specified in the contract and to inform the buyer in time.
When the goods cross the ship’s rail while being loaded, the risk passes from the seller to the buyer.
The buyer shall be responsible for chartering the vessel, booking the shipping space, paying the freight and notifying the seller of the date and name of the vessel in time.
Other responsibilities and expenses after the goods have passed the ship’s rail at the port of shipment shall also be borne by the buyer, including obtaining the import license or other official documents, as well as the formalities and fees for the entry of the goods.
Should the Buyer appoint a vessel and fail to inform the Seller in time of its name, loading berth and date of shipment, or should the vessel appointed by the buyer fail to arrive in time or carry the cargo, or should the vessel fail to load the cargo before the expiry of the prescribed period, the Buyer shall be liable for all risks and losses arising therefrom.
Provided that the goods have been clearly separated or fixed for the supply of this contract.
Under F.O.B. terms, the seller shall obtain the export license or other official documents at his own risk and expense and handle the export formalities.
The seller shall provide proof that he has fulfilled his obligation to deliver the goods as stipulated at his own expense.
The Seller may give all assistance in obtaining bills of lading or other transport documents at the buyer’s request and at the Buyer’s risk and expense.
In case of liner transportation, the shipping charges will be included in the liner freight, and the shipping related expenses will be borne by the buyer who is responsible for handling shipping matters.
And if the use of charter ship transport, according to the shipping practice, usually in the charter party does not bear the shipping costs.
In this case, the buyer and the seller shall specify in the contract the expenses for loading, stowing and trimming. In order to avoid disputes between the buyer and the seller on the issue of the burden of shipping expenses, we usually choose F.O.B.
Then various additional conditions are added, which produces the distortion of F.O.B. They take the following forms:
- O.B.Liner terms, means that the costs associated with loading are handled according to liner practice, that is, they are not borne by the seller but are borne by the ship, in effect, by the buyer.
- O.B.Under Tackle, the definition is that the seller is only responsible for delivering the goods to the point where the hooks of the vessel designated by the buyer can reach, and the subsequent loading costs shall be borne by the buyer.
- O.B.Stowed, this condition means that the seller shall deliver the goods into the hold of the ship and bear the loading charges including stowing charges.
- O.B.Trimmed, this means that the seller shall be responsible for loading the cargo into the hold of the ship and for filling up the bulk cargo in the hold for the purpose of keeping the ship smooth, all expenses mentioned above shall be borne by the Seller.