FOB shipping is an incoterm used while shipping goods across the supply chain internationally. It applies to maritime shipping and establishes a trade contract between the buyer and seller where they both negotiate the terms and conclude to choose between FOB origin and FOB destination, based on their benefits. It helps shipping parties to discuss and establish the point of change in ownership of the goods during their transit to verify the risk and cost transfer for paying the costs of various shipping activities. Let us learn more about FOB shipping and its benefits in international shipping.
What do you mean by incoterms in shipping? Foreign trade terms are also referred to as "incoterms, " an abbreviation for international commercial terms. These are standardised terms commonly used throughout the shipping industry in the case of international trade. It concerns trade contracts made for importing and exporting goods across borders. These terms were coined by the International Chamber of Commerce (ICC) to establish a standardised process that facilitates and regulates international trade. Since various countries across the globe get involved in the shipping business, there was a need to develop a common understanding between the buyer and the seller about different rights and responsibilities concerning cross-border transactions. Incoterms help the shipping partners define various aspects of shipping, such as the transportation of goods, risk transfer, and cost transfer between the buyer and the seller. Define FOB shipping The incoterms used in the shipping industry differ for land- and sea-based transportation. FOB is an acronym for free onboard shipping, a maritime term widely used in the shipping industry. It is a trade contract between the buyer and the seller that states the point of risk and cost transfer, obligations, and guidelines for shipping to the concerned shipping party. Based on the type of FOB, the contract is named "FOB", followed by the port's name where the risk transfer occurs, i.e., the point of the shift of responsibility associated with cargo risks from the buyer to the seller. Both the shipping parties negotiate terms and conditions of shipping to conclude so that the shipping company or the carrier is clear about the owner of the goods during the voyage. Such a trade contract is essential for avoiding misunderstandings and settling financial disputes related to the cargo, especially regarding international trade. What are the types of FOB shipping? The two types of FOB in shipping are-
Benefits of FOB in shipping The advantages of FOB shipping are-
These are a few benefits of FOB shipping that can be negotiated between the shipper and buyer to draft a trade contract for international shipping. LOTUS Containers is a shipping container service provider enriching its valuable clients with various shipping containers such as double door, flat rack and reefer containers.
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4/10/2024 11:21:37 pm
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