NEWS
Essential Foreign Trade Knowledge for Freight Forwarders
FOB (Free On Board... named port of shipment)
FOB stands for Free On Board, meaning the seller delivers the goods on board the vessel designated by the buyer at the named port of shipment. According to the International Chamber of Commerce's interpretation of FOB:
Seller's basic obligations:
(1) Complete export customs clearance and bear all costs and risks until the goods have passed the ship's rail at the port of shipment.
(2) Deliver the goods on board the vessel designated by the buyer at the named port of shipment, on the agreed date or within the agreed period, in the manner customary at the port, and give the buyer notice that the goods have been delivered on board.
(3) Provide the buyer with the agreed documents or equivalent electronic messages (EDI).
Buyer's basic obligations:
(1) Charter a vessel or book the necessary space in due time to the named port of shipment, pay the freight, and give the seller sufficient notice of the vessel's name and the loading date at the port.
(2) Bear all costs and all risks of loss of or damage to the goods from the time they have passed the ship's rail at the port of shipment.
(3) Take delivery of the documents or equivalent electronic messages as stipulated in the contract and pay the price.
Variants of the FOB Term
(1) FOB Liner Terms: The loading charges are handled according to liner terms, meaning the seller does not bear the loading costs. This does not imply that FOB goods must be shipped by liner; who bears the loading costs depends on the charter party terms when the buyer charters the vessel.
(2) FOB Under Tackle: The seller only delivers the goods within the reach of the vessel's tackle designated by the buyer. The seller does not bear any subsequent loading costs.
(3) FOB Stowed: To ensure the cargo loaded on board is properly placed and reasonably distributed, dunnage and securing are required after loading, which is known as stowing. The seller must bear the stowing charges.
(4) FOB Trimmed: After loading, to maintain the vessel's stress equilibrium and ensure safe navigation, bulk cargo loaded in heaps into the hold needs to be leveled and trimmed, which is known as trimming. The seller must bear this cost.
CFR (Cost and Freight... named port of destination)
CFR stands for Cost and Freight, meaning the seller must pay the costs and freight necessary to bring the goods to the named port of destination. The cost here is equivalent to the FOB price.
Seller's basic obligations:
(1) Provide the goods as specified in the contract, contract for carriage and pay the freight, deliver the goods on board the vessel at the port of shipment on time, and give the buyer sufficient notice that the goods have been delivered on board.
(2) Complete export customs clearance and bear all risks until the goods have passed the ship's rail at the port of shipment, and all costs of delivering the goods on board at the port of shipment.
(3) Provide the relevant documents or equivalent electronic messages as stipulated in the contract.
Buyer's basic obligations:
(1) Bear all risks of loss of or damage to the goods from the time they have passed the ship's rail at the port of shipment, as well as any additional costs arising from events occurring after the goods have been delivered on board.
(2) Take delivery of the goods at the named port of destination as stipulated in the contract, complete import customs clearance, and pay any import duties.
(3) Take delivery of the documents or equivalent electronic messages provided by the seller and make payment as stipulated in the contract.
