Incoterms
FOB | Free On Board
Incoterms® 2020
When talking about Incoterms, reference is always made to transportation risks and costs. The agreed Incoterm always indicates where and when the costs and risks are transferred from the seller to the buyer.
All Incoterms Build your booth
Main international transportation methods
Air Freight
Recommended transportation method for international purchases or sales requiring a short delivery time
Sea Freight
Recommended transport method for international purchases or sales requiring lower freight rates
Land Freight
Recommended transport method for international/domestic purchases or sales with short to medium transit distances
Rail Freight
Recommended transport method for international purchases or sales requiring large load volumes. Multimodal transport with low accident rate.
Express Freight
Recommended method of transportation for domestic purchases or sales with small cargo volumes.
Air Freight
Recommended transportation method for international purchases or sales requiring a short delivery time
Sea Freight
Recommended transport method for international purchases or sales requiring lower freight rates
Land Freight
Recommended transport method for international/domestic purchases or sales with short to medium transit distances
Rail Freight
Recommended transport method for international purchases or sales requiring large load volumes. Multimodal transport with low accident rate.
Express Freight
Recommended method of transportation for domestic purchases or sales with small cargo volumes.
Before you know...
¿What are the real risks during transport?
UNINTENDED ACCIDENTS
During loading/unloading of goods. During the handling. During transshipment storage (if the goods are to be temporarily stored en route)
NATURE OF THE GOODS
Leaks, explosion of dangerous goods,
oxidation, rust.
HUMAN INTERVENTION
Theft, piracy, accidents due to carrier negligence, faulty handling.
FLAWED GOODS
Previous defects or deficiencies in the goods themselves or in the packaging.
The Seller must ensure that the packaging is adequate to avoid surprises in case of possible incidents.
ACCIDENTS OF TRANSPORTATION
Sea: Shipwreck. Stranded or aground. Approach or intentional collision. Unintentional collision.
Air: aircraft crash.
Road: overturning, collision...
In any means of transport: fire, explosion,...
SOCIAL-POLITICAL
Wars, strikes, revolutions, riots,...
Risks that have in common the concurrence of the collective action of man in the realization of the risk.
UNINTENDED ACCIDENTS
During loading/unloading of goods. During the handling. During transshipment storage (if the goods are to be temporarily stored en route)
NATURE OF THE GOODS
Leaks, explosion of dangerous goods,
oxidation, rust.
HUMAN INTERVENTION
Theft, piracy, accidents due to carrier negligence, faulty handling.
FLAWED GOODS
Previous defects or deficiencies in the goods themselves or in the packaging.
The Seller must ensure that the packaging is adequate to avoid surprises in case of possible incidents.
ACCIDENTS OF TRANSPORTATION
Sea: Shipwreck. Stranded or aground. Approach or intentional collision. Unintentional collision.
Air: aircraft crash.
Road: overturning, collision...
In any means of transport: fire, explosion,...
SOCIAL-POLITICAL
Wars, strikes, revolutions, riots,...
Risks that have in common the concurrence of the collective action of man in the realization of the risk.
¿Should I insure the goods?
Accidents are unpredictable, but as we have
seen, there are certain situations
that increase the risk of accidents.
Carrier coverages
The carrier usually has contracted a policy for the transports it manages, but this policy normally overcovers up to a limit, depending on the rules of each means of transport:
SEA | Haya Visby Rules
666,67 SDR per package, or unit load, or 2 SDR /Kg gross weight. The higher of the two shall apply.
AIR | Montreal Convention
19 SDR /kg gross weight of merchandise lost, damaged or delivered late.
ROAD | CMR Convention
8,33 SDR /kg gross weight for loss and damage and the price of transportation for delays.
Special Drawing Rights ('SDR') is the International Monetary Fund's Unit of Account. It is a basket of currencies that includes the Euro, US Dollar, Japanese Yen and Pound sterling. It is determined daily and published on the IMF's website. Its value can be consulted on the IMF's home page: https://www.imf.org/en/Home
FOB Process
FOB – Free on Board
FOB – Port of shipment, is an Incoterm exclusively for sea or inland waterway transport where the seller delivers the goods on board the vessel contracted by the buyer and at the named port of loading. Thus the risk of loss or damage is transferred from the seller to the buyer when the goods are placed on the named vessel.
It should be considered that if the transfer of risk and costs is to be made at the port terminal, before the container is shipped, the use of the FCA Incoterm is recommended instead of the FOB Incoterm.
Regarding transport and handling, the seller must then assume all the costs of packing and checking the goods correctly, transport to the place of loading of the goods (direct to the terminal if it is a full container or to the consolidation warehouse if it is a groupage cargo) and the subsequent loading to the Vessel. Seller will have to assume the costs of the company indicated by the buyer, since it is the buyer who contracts and decides the main transport.
The buyer, for his part, shall bear the costs of the main transport, subsequent unloading and subsequent delivery to his premises.
At the documentary and customs level, the seller must process all the necessary documentation at origin, both for export and for subsequent import. For these documents processed at origin, but necessary at destination, it is the seller who has the obligation to process them, but the buyer assumes the cost. The seller must also assume the costs of the export clearance as well as the duties and taxes that may be generated.
The buyer assumes the cost and obligation of processing the necessary documentation at destination, as well as import clearance and duties.
In any case, there must be an implicit collaboration between buyer and seller so that the documentation and formalities can be carried out without hindrance.
In relation to the insurance of the goods, the seller must assess whether to insure the goods for the stretch from its warehouse to the loading of the ship. Loading a container directly from the warehouse to the terminal, has less risk of accident than a groupage cargo that will suffer more manipulations. The buyer is not obliged to take out any insurance either, but as he is responsible for more of the transport, it is advisable to insure the goods. The seller must provide all the necessary information to the buyer if he decides to insure the goods.
Here is a summary of costs and responsibilities:
Packing
Verification
Control.
Licenses and authorizations.
Other formalities
Loading into truck or
container at factory
or warehouse
Inland
Insurance
Inland transportation country of origin.
(From factory to port/airport terminal or
to carrier)
Customs
formalities
export
Terminal handling costs
at origin
(Port, airport, rail)
Main international transportation
International
insurance
Inland
insurance
Destination terminal handling costs
(Port, Airport)
Customs formalities
import (tariffs, internal and special taxes and formalities).
Import licenses and authorizations
Inland transportation country of destination.
(From port,
airport or terminal to factory or logistics operator)
Unloading
Successful
delivery
Packing
Verification
Control.
Licenses and authorizations.
Other formalities
Loading into truck or
container at factory
or warehouse
Inland
Insurance
Inland transportation country of origin.
(From factory to port/airport terminal or
to carrier)
Customs
formalities
export
Terminal handling costs
at origin
(Port, airport, rail)
Main international transportation
International
insurance
Inland
insurance
Destination terminal handling costs
(Port, Airport)
Customs formalities
import (tariffs, internal and special taxes and formalities).
Import licenses and authorizations
Inland transportation country of destination.
(From port,
airport or terminal to factory or logistics operator)
Unloading
Successful
delivery
Who has the Obligation
Who assumes risk
Who bears the Cost
Origin
Have the goods ready and well packaged within the indicated
time limit
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your export procedures.
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your import procedures.
Loading of goods by truck or container
Inland insurance (from warehouse to main transport)
Inland transport (from the warehouse to the agreed point)
Export customs formalities, including possible duties and taxes.
Handling and loading charges to the main transport
Main Transportation
Main Transportation
International Insurance
Destination
Handling and unloading costs of the main transport
Import licenses and authorizations
Customs Import Formalities
Taxes and fees
Inland Insurance (from main transport to destination warehouse)
Inland transport (from the main transport to the destination warehouse)
Unloading of goods at final destination
Origin
time limit
Main Transportation
Destination
