Learning more about Incoterms®2010

Free on Board or FOB (named port of shipment) Incoterms®2010 is the ninth of eleven 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 ten obligations that the buyer might need to fulfil in terms of Free on Board or FOB: (1) general obligations of the buyer; (2) licences, authorisations, security clearances and other formalities; (3) contracts of carriage and insurance; (4) taking delivery; (5) transfer of risks; (6) allocation of costs; (7) notices to the seller; (8) proof of deliver; (9) inspection of goods; and (10) assistance with information and related costs. The general obligation of the buyer is essentially to pay the price of the goods in conformity with the contract of sale. In respect of the licences, authorisations, security clearances and formalities the buyer has, with respect to the importation of the goods, to obtain such at his/her own risk and expense. With respect to the contract of carriage the buyer must contract at his/her own expense for the carriage of the goods from the named port of shipment, except where the contract of carriage is made by the seller. The buyer has no obligation to the seller to contract for insurance. The buyer must take delivery of the goods when it is delivered. The buyer must give the seller notice of the vessel and loading point, and in instances where necessary, the delivery time. The cost of any mandatory pre-shipment inspection must be borne by the buyer, except in the instance where such inspection is mandated by the country of export. As for the assistance with information (including securityrelated information) and related costs, the buyer must advise the seller of such requirements, reimburse the seller for all costs and charges incurred, and render assistance to the seller. In next week’s issue we will provide a summary of Free on Board (FOB).