Incolearn ¨C Learning more about Incoterms 2000

FREE ON BOARD (FOB) PART I ¨C Introducing Free on Board The International Chamber of Commerce (ICC) defines the fourth Incoterm, Free on Board (FOB), at a named port of shipment, as ¡°the seller delivers when the goods pass the ship¡¯s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export ¡±. Should the contracting parties not intend to deliver the goods across the ship¡¯s rail then the Free Carrier (FCA) should be used. Free on Board is the last of the three (3) F-terms also known as the main carriage unpaid terms, the other being Free Carrier (FCA), and Free Alongside Ship (FAS). It is important to remember that this term can be used only for sea or inland waterway transport. This is, contrary to popular belief, not a multimodal term. According to Professor Jan Ramsberg, the chairman of the ICC Working Party on Trade Terms, the seller¡¯s primary duty is to contract for carriage, deliver the goods on board, provide a clean transport document i.e. bill of lading or sea waybill, arrange export clearance, and pay unloading costs if for this account under the contract of carriage. The buyer¡¯s primary duty is to accept delivery of the goods upon shipment, to receive the goods from the carrier, and pay costs that are not for the seller¡¯s account under the contract of carriage. The documents required in terms of the contract of sale should be the commercial invoice, transport document, and an export licence if necessary. The other documents that could be considered for stipulation in the contract of sale could be any documents needed for the transit of the goods through any country or for import clearance. The three critical points of Free On Board are firstly, that the carriage is arranged by the seller. Secondly, the risk transfers from the seller to the buyer when the goods pass the ship¡¯s rail, and thirdly, the cost transfers at the port of destination, with the buyer paying costs that are not for the seller¡¯s account under the contract of carriage. ¡ñ This column is published out of sequence. It was inadvertently omitted and superseded by Part II in the series on FOB.