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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.

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.

¿Should I insure the goods?

Accidents are unpredictable, but as we have
seen, there are certain situations
that increase the risk of accidents.

Dangerous or fragile goods
Location of buyer or seller in conflict zones
Transport route through unsafe areas
Handling of transports that require a lot of manipulations. Except for door-to-door transports (full truck loads or full containers), all other transports imply that the goods will pass through many transit warehouses, so the goods will be subject to several manipulations, increasing the probability of an accident.
Dangerous or fragile goods
Location of buyer or seller in conflict zones
Transport route through unsafe areas
Handling of transports that require a lot of manipulations. Except for door-to-door transports (full truck loads or full containers), all other transports imply that the goods will pass through many transit warehouses, so the goods will be subject to several manipulations, increasing the probability of an accident.

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

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your export procedures.

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your import procedures.

Obligation
Seller
Take risk
Buyer
Assume cost
Buyer

Loading of goods by truck or container

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Inland insurance (from warehouse to main transport)

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Inland transport (from the warehouse to the agreed point)

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Export customs formalities, including possible duties and taxes.

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Handling and loading charges to the main transport

Obligation
Seller
Take risk
Seller
Assume cost
Seller

Main Transportation

Main Transportation

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

International Insurance

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Destination

Handling and unloading costs of the main transport

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Import licenses and authorizations

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Customs Import Formalities

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Taxes and fees

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Inland Insurance (from main transport to destination warehouse)

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Inland transport (from the main transport to the destination warehouse)

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Unloading of goods at final destination

Obligation
Buyer
Take risk
Buyer
Assume cost
Buyer

Origin

Have the goods ready and well packaged within the indicated
time limit
Seller
Seller
Seller
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your export procedures.
Seller
Seller
Seller
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your import procedures.
Seller
Buyer
Buyer
Loading of goods by truck or container
Seller
Seller
Seller
Inland insurance (from warehouse to main transport)
Seller
Seller
Seller
Inland transport (from the warehouse to the agreed point)
Seller
Seller
Seller
Export customs formalities, including possible duties and taxes.
Seller
Seller
Seller
Handling and loading charges to the main transport
Seller
Seller
Seller

Main Transportation

Main Transportation
Buyer
Buyer
Buyer
International Insurance
Buyer
Buyer
Buyer

Destination

Handling and unloading costs of the main transport
Buyer
Buyer
Buyer
Import licenses and authorizations
Buyer
Buyer
Buyer
Customs Import Formalities
Buyer
Buyer
Buyer
Taxes and fees
Buyer
Buyer
Buyer
Inland Insurance (from main transport to destination warehouse)
Buyer
Buyer
Buyer
Inland transport (from the main transport to the destination warehouse)
Buyer
Buyer
Buyer
Unloading of goods at final destination
Buyer
Buyer
Buyer

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