A type of incoterm is known as FOB in which the selling party, in a sale, is responsible for the derived costs until the merchandise is deposited at the point of departure.
Being one of the most widespread practices in the field of international trade , the FOB is configured as a modality that distributes risks and costs between the buying and selling parts of merchandise.
The International Chamber of Commerce is the organization responsible for establishing the different types of incoterms existing in the day-to-day world trade. The FOB is one of the most recurring examples among them and its use is extended in part thanks to the advantages it offers in relation to lower levels of risk distributed among parties linked to operations.
The acronym for this concept (free on board) refers to the nature of this type of trade agreement . In this way, the seller takes care of the merchandise from its origin until its delivery at the port of origin or departure.
From that moment, the buyer is responsible for the goods transported in terms of expenses related to insurance , transportation and commercial fees.
Basic implications of a FOB type trade agreement
Buying and selling operations carried out through commercial agreements of the FOB type will have some characteristic points to highlight especially:
- The seller is responsible for transporting the goods to the port of departure, assuming the expenses corresponding to said phase of the operation. These range from the production and packagingof this to its transport to the point of shipment chosen by the plaintiff.
- Once the asset is deposited in port, this responsibility is transferred to the buyer, thus distributing the degree of economic responsibility in the operation between both parties. It will also deal with the costs of international transportation and insurance coverage contracted in the event of loss or damage.
- Official costs in the form of tariffsand customs will also be distributed. In this way the sellers take charge of exit point rates and buyers of those corresponding to the final destination point.
- Exclusive use of operations carried out in the maritime environment.