For domestic or international shipping
, the term ‘FOB’ is often used in logistics documents. FOB or Freight on Board is a law term used to indicate the transfer of ownership of shipped goods from an exporter to an importer.
What is the meaning of FOB in shipping?
Freight on Board, known as Free on Board (FOB), is a term or phrase used to highlight when the ownership (cost and risk) of the shipped goods are transferred to the importer from the exporter. In simple words, FOB highlights the point in the export logistics process
where exporter’s responsibility ends for the exported goods and the importer is expected to take over – both for the liability and costs involved. Usually, the exporter is expected to pay shipping charges until the goods reach a specified destination. Then, the importer is expected to pay freight from the port to his warehouse or vendors1
Brief history of Freight on Board
According to incoterms
, Freight on Board was introduced for seamless shipping across borders. The term’s usage has changed over the years and the understanding or definition also varies from country to country. Historically, FOB has been used to transfer liability and title between the exporter and the importer2
Types of FOB
There are two types of FOB3:
In this type, the importer pays for the costs of transporting goods from the exporter’s warehouse to the final destination.
In this type, the exporter handles shipping costs involved in sending goods to the final destination.
Conditions of using FOB in import-export
The value of FOB is usually set by importers who have a fair idea about the costs involved in international trade. Importers have shipping agents at ports where goods are expected to arrive. The exporter is expected to send goods to the destined delivery port and then, it is considered that they have been delivered to the importer. The primary condition of using FOB in import-export is that the importer has an option to negotiate prices for freight services.
Different FOB terms you must know
Some of the popular FOB terms are:
FOB origin, freight prepaid
While an exporter is expected to pay shipping costs, the importer assumes responsibility for the origin of the goods.
FOB origin, freight collect
The importer pays for the shipping costs and handles the cargo responsibility.
FOB origin, freight prepaid and charged back
In this case, the exporter is not expected to pay shipping costs. They are added to the final invoice as freight costs and sent to the importer. The importer assumes responsibility for the origin of the goods and is expected to pay the freight cost bill.
FOB destination, freight prepaid
The exporter is in charge of the shipping costs till the cargo reaches the importer’s store. The importer is not expected to pay shipping costs.
FOB destination, freight collect
The importer is expected to pay shipping charges only after goods are delivered. Responsibility of the importer starts once goods reach the warehouse.
FOB destination, freight prepaid and charged back
Goods are the responsibility of the exporter. The importer sends the invoice and deducts shipping charges. The exporter has paid shipping charges as part of the original invoice.
FOB destination, freight collect and allowed
The exporter adds shipping charges to the invoice, and the importer is expected to pay. In this case, the exporter takes responsibility for the goods until they are delivered.
While you can choose to manage your own shipping via MFN
, with Amazon partner carrier service, you can focus on your business expansion and goals while Amazon takes care of delivering your products to international customers.
Fulfillment by Amazon (FBA): A seamless international shipping model
FBA enables Indian sellers to reach international customers and deliver their products across the globe in a hassle-free manner. When you choose FBA to ship your products, here’s what you get:
- Amazon stores your products in the Amazon fulfillment center.
- Amazon handles quick delivery to destinations across the globe with the Prime shipping option.
- Amazon offers 24/7 customer service
- Amazon FBA takes care of the returns
- Amazon FBA notifies you when you need to restock the products (if needed).
Amazon Global Selling: Easy e-commerce exports
With the growing demand for Indian products in international marketplaces, exporters and Indian sellers are keen to expand their businesses to the world. Amazon Global Selling is an e-commerce exports program that enables exporters and MSMEs to start and grow their export business in 200+ countries and territories. The exporter can simply register with the program in four simple steps and reach millions of customers shopping on 18+ Amazon international marketplaces.
Published on October 31, 2022.