Conditions of delivery of goods in the determination of prices stating that the risk and all costs of transporting goods to the ship at the shipping port are borne by the seller (free on board / FOB).
Financial Fervices Authority
Free On Board (FOB) is part of Incoterms. Delivery of goods by the Free On Board is carried out on the ship that will transport the goods. In addition, the seller has the obligation to take care of export formalities. Requirements for using FOB can only be carried out for sea transportation and between islands.
Is It Free to Ship?
Free shipping on board or commonly referred to as free on board (FOB) is a shipping term used to indicate whether the seller or buyer is responsible for goods that are damaged or destroyed during shipping. “FOB shipping point” or “FOB origin” means the buyer is at risk and takes ownership of the item after the seller has sent the item. For accounting purposes, suppliers must record sales at the point of departure from their port of shipment. “FOB origin” means the buyer pays shipping costs from the factory or warehouse and obtains ownership of the goods immediately after leaving the place of origin. “FOB objective” means that the seller remains at risk of loss until the goods reach the buyer. In short, FOB means that the exporter bears all costs from the exporter’s warehouse to the delivery of goods on board. After the goods are on board, the cost is borne by the importer.
Example of Free on Board
ABC Company sells coal to XYZ Company for Rp700,000 per ton with the FOB clause. This means that the XYZ company only buys Rp. 700,000 (multiplied by the total kilos or tons purchased), and transportation costs over the sea are also the responsibility of the XYZ company. There is a possibility that the company will spend more money to actually get the goods ordered.