Delivery on FOB Terms

In the modern world of international trade, the speed of delivery while maintaining the integrity and operational characteristics of goods plays a key role. This process is regulated by Incoterms rules, which define the distribution of responsibilities between the parties in a trade transaction. They can be divided into two categories: universal, which apply to delivery by various modes of transport, and specialized, which are suitable only for maritime transport. The second category includes FOB Incoterm conditions, which are abbreviated as Free on Board.

What are the FOB Delivery Terms

This method of risk and responsibility division assumes that the seller fulfills their obligations for delivering the goods up to the moment of loading onto the vessel, including customs clearance for export. The buyer assumes all risks and expenses from the receipt of the cargo on the vessel until delivery to the final destination. FOB delivery terms are applied for transportation by river or sea transport.

Features of Delivery Under FOB Terms

This term is often applied when goods are delivered from China to Ukraine, as maritime transport is predominantly used for this purpose. The FOB term has several specific implementation features:

1. Clear division of risks and responsibilities, which helps avoid misunderstandings in case of force majeure situations and ensures transaction transparency with an understanding of who pays for what.
2. Documentary processing of the cargo by the sender according to FOB terms. The seller provides all necessary documents for the export of goods, including the bill of lading, invoice, and packing list, as well as permits, certificates, licenses, etc.
3. Transportation. All transportation costs and risks after loading onto the vessel are transferred to the buyer. This includes insurance, vessel freight, coverage of possible losses and risks.

Obligations of the Parties under FOB Rules

When FOB delivery is carried out, the responsibilities of the seller and buyer are distributed as follows:

For the seller:

• preparation and packaging of the goods according to the agreements;
• organization of transportation of the cargo to the port specified in the contract;
• provision of a documentation package to confirm the origin, quality, characteristics, and cost of the goods;
• preparation of export documents, with customs brokerage services involved if necessary, payment of all costs associated with the customs clearance stage;
• loading of the goods onto the vessel;
• informing the buyer about the loading.

For the buyer, FOB delivery terms imply responsibility for:

• payment for the batch of goods in accordance with the foreign trade contract;
• finding a carrier and paying for the freight of the vessel;
• cargo insurance if the consignee wants to minimize their risks, though this is not a mandatory requirement;
• payment of all expenses related to the transportation of the goods after they are loaded onto the vessel;
• processing import documents, paying duties, and other charges;
• receiving and unloading the goods at the port;
• organizing transportation to the final destination.

Advantages and Disadvantages of FOB Terms

Like other Incoterms rules, FOB delivery has its strengths and weaknesses for both the seller and the buyer.

Advantages:

1. Transparency and clarity. The distribution of responsibilities and risks between the parties to the contract is detailed, which minimizes the possibility of disputes.
2. Buyer’s control. The consignee independently controls most of the logistical processes, which ensures their confidence in the safety of the goods.
3. Flexibility in carrier choice. The buyer can independently choose the shipping company and the terms of freight, allowing them to manage their expenses.

Disadvantages of FOB:

1. Significant risks for the buyer, which are assumed by this party immediately after receiving the cargo on board the vessel. 
2. Dependence on the seller. The quality of packaging and documentation directly depends on the shipper. 
3. Unexpected expenses for the consignee that may arise during transportation.

Advantageous FOB Deliveries from DiFFreight Company

As one of the leaders in this market segment, we provide a wide range of international logistics services. With our assistance, FOB deliveries will be handled responsibly and with consideration for the customer's needs. Our work is distinguished by:

• professionalism. Our qualified and experienced logisticians, customs brokers, and marketers organize the logistics process under the most favorable conditions;
• comprehensive approach. DiFFreight takes on the organization of all stages of the logistics chain, from document preparation to unloading the goods at the destination;
• competitive FOB pricing. Thanks to established relationships with shipping companies, DiFFreight offers competitive rates for freight and other services.

Collaboration with DiFFreight guarantees successful and safe delivery of your goods with minimized risks.