The definition of FOB is the process of delivering goods that have been agreed by the seller or buyer in the export and import process. In the world of exports and imports including import shipping services, there are many important terms to understand including FOB which stands for Free on Board.

What is FOB — Free on Board? - YouTube

FOB is also one of the payment systems previously agreed by the buyer and seller, for example in international trade.

Understanding FOB and Important Concepts Inside

After discussing the definition of FOB, you need to know the important concepts of sellers and buyers in FOB, it is also important to note. The following are the important concepts in question:

•        Obligations of the buyer

in FOB, the buyer has the obligation to take care of fees, cover insurance, pay freight, and also arrange a transportation contract in an interstate trade.

•        Obligations of the seller

while the seller has an obligation to deliver the goods up to when, make clean on board receipt, pay the necessary tax costs and also prepare permission for export purposes.

In this case, the seller and the buyer perform their respective roles in order to create a process of trade between countries that is mutually beneficial and safe.

There are two types of FOB

There are two types of FOB which are known in the world of international trade alias exports and imports related to shipping costs. The two types in question are FOB Shipping Point and also FOB Destinastion. For more details, you can see the explanation below.

•        FOB Shipping Point

This FOB is done with a payment system in which the buyer or importer bears shipping costs. Importers also bear all the risks that could occur from shipping to the time the goods reach the warehouse.

•        FOB Destination

Next is the FOB Destination provided that the shipping costs are borne by the seller or the exporter. Not only that, but the responsibility of the exporter also includes the risk of the goods while on the trip and will end if the goods have arrived at the hands of the importer.

Each system from the FOB above, of course there are disadvantages and advantages. In this case, the system can be determined according to the needs and also the agreement of the parties involved.

Other Payment Methods Besides FOB

Besides FOB, there are also several other payment methods that can be chosen according to your needs. Some of the methods referred to include the following:

  • FCA which stands for Free Carrier
  • Ex Works
  • CIF or Cost Insurance and Freight
  • CFR which stands for Cost and Freight
  • FAS or free Alingside Ship
  • DEQ or Delivered ex Ship
  • DAF with the abbreviation Delivered at Frontier
  • CPT or Carriage Paid to
  • DDU which stands for Unpaid Delivery Duty
  • Paid DDP or Delivery Duty

And other types of payment systems. Payments can be adjusted according to the agreement between the buyer and the seller. Payment system, should be chosen and carried out with mutual benefit for both parties involved.

Understanding the meaning of FOB is important, especially for business people who are involved in the world of exports and imports.