Learning more about Incoterms®2010

Free on Board or FOB (named port of shipment) Incoterms®2010 is the ninth of 11 Incoterms (it is always plural) for the class “Rules for Sea and Inland Waterway Transport”. According to the International Chamber of Commerce (ICC), in “the second class of Incoterms®2010 rules, the point of delivery and the place to which the goods are carried to the buyer are both ports, hence the label ‘sea and inland waterway’ rules”. The ICC’s Incoterms®2010 identifies 10 obligations that the seller might need to fulfil in terms of Free on Board or FOB: (1) general obligations of the seller; (2) licences, authorisations, security clearances and other formalities; (3) contracts of carriage and insurance; (4) delivery; (5) transfer of risks; (6) allocation of costs; (7) notices to the buyer; (8) delivery document; (9) checking, packaging, marking; and (10) assistance with information and related costs. The general obligations of the seller are essentially the provision of goods and the commercial invoice in conformity with the contract of sale, which implies that the documents stipulated in the contract of sale must be provided. In respect of the licences, authorisations, security clearances and formalities, the seller must obtain such at its own risk and expense, and also must carry out the customs formalities necessary for the export of the goods. With respect to the contact of carriage and the contract of insurance, the seller has no obligation, however the seller could assist the buyer at its request and expense. For the delivery to be effected the seller must place the goods on board the vessel nominated by the buyer at the loading point. The seller bears all risks of loss of or damage to the goods until it has been delivered. As for the allocation of costs, the seller must pay all costs until the goods have been delivered, and, where applicable, costs of customs formalities. The seller must, at the buyer’s risk and expense, give notice to the buyer that the goods have been delivered. The seller must, at its own expense, provide the buyer with proof that the goods have been delivered. With respect to the checking, packaging, marking, the seller must pay those costs that are necessary for the purpose of the delivery of the goods, as well as the costs of any preshipment inspection mandated by the authority in the country of origin. As for the assistance with information (including securityrelated information) and related costs, the buyer could request such from the seller, but this would be for the buyer’s risk and account. In next week’s issue we will define Free on Board (FOB) – The Buyer’s Obligations.