Why is INCOTERM FOB so popular?

Simple risk sharing: FOB establishes a clear point at which the risk of loss or damage to the goods passes from the seller to the buyer. This point is when the goods cross the ship's rail at the port of shipment. This clear separation makes it easier for both parties to manage their insurance and transportation contracts.

 

Cost control for the buyer: As the buyer is responsible for the freight from the moment the goods are loaded on board the ship, he has control over the choice of carrier and can therefore better control costs and logistics processes.

 

Familiarity and acceptance: FOB is one of the oldest and best known clauses, recognized and understood by companies worldwide. This familiarity facilitates negotiations and contract drafting.

 

Advantages for the seller: For the seller, FOB offers the advantage that he is only responsible until the goods are loaded on board the ship. This means that he does not have to worry about transportation by sea or arrival in the country of destination.

 

Flexibility: FOB can be used to ship a wide variety of goods as well as being flexible enough to meet the needs of buyers and sellers who want to make different arrangements for transportation and insurance.

Customs clearance:

In the FOB clause, the seller is responsible for clearing the goods for export, which means that he handles all formalities and processes until the time of loading onto the ship. This can be advantageous for the buyer as they do not have to deal with the export formalities in the country of origin.

Advantages of FOB

Because of these advantages, FOB is an attractive choice for many international trade transactions, especially those involving ocean freight. However, it is important to note that according to Incoterms 2020, FOB is only intended for sea transportation or inland waterway transportation. Other Incoterms should be used for other types of transport.

 

Clarity in responsibility: FOB gives both parties clarity about the time and place of handover. This reduces the risk of misunderstandings and disputes.

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