What is FOB Price?

FOB Price (also known as FOB contract) is a form of sale where the seller fulfills their responsibility by delivering the goods onto the vessel designated by the buyer. FOB terms apply only in the field of import-export involving waterway transportation. FOB price is the price at the exporting party's border gate (this price does not include insurance and shipping costs to the importing party's port).

Rights and Obligations of the Buyer and Seller:

Seller:

- Obtain export license, pay export taxes and fees (if necessary);- Deliver the goods onto the ship;- Provide transport documents proving the goods have been loaded onto the ship;- Bear the cost of loading the goods onto the ship according to the port's customs if this cost hasn't been included in the freight charge.

Buyer:

- Sign the transport contract and pay the freight;- Pay the loading costs if these costs are included in the freight charge;- Collect the bill of lading;- Pay the unloading costs;- Bear all risks and losses of the goods from the time the goods have passed the ship's rail at the loading port.

According to Incoterm 2010, under FOB terms, the risk is transferred to the buyer once the goods are on board the ship. If during the process of transferring the goods over the ship's rail the goods are dropped or broken, the seller bears full responsibility. The buyer only bears the risk (purchases insurance) and pays the shipping freight and other procedures until the goods reach their warehouse.

Under these terms, the buyer has the right to choose the shipping agent and carrier. However, they must cooperate with the seller's shipping agent to ensure the goods arrive at the port within the stipulated time.

For FOB, the importer enjoys several benefits at both national and enterprise levels. Signing an import contract under FOB terms means the enterprise gains control over transportation and insurance of their goods. They are proactive in negotiating transportation and insurance contracts, thus can potentially save costs by negotiating better freight rates and cheaper insurance premiums.

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE