Types of FOB (Freight on Board)

1. FOB Origin (or FOB Shipping Point)

In FOB Origin terms, the seller fulfills their obligation when the goods are loaded onto the transportation vessel at their location, typically a factory or warehouse. FOB Origin terms are often used when the buyer has more control over the logistics and transportation arrangements and is comfortable assuming the risks and costs associated with transporting the goods. Key characteristics of FOB Origin-

• The buyer assumes responsibility for transportation costs, risks, and insurance once the goods are loaded onto the transport.
• The buyer has control over the choice of shipping method, carrier, and insurance coverage.
• Any potential damages or losses during transit are the buyer’s responsibility.

2. FOB Destination (or FOB Destination Point)

In FOB Destination terms, the seller is responsible for transportation costs, risks, and insurance until the goods reach the buyer’s specified destination. FOB Destination terms are often used when the buyer wants the seller to handle the logistics, transportation, and insurance, making the transaction more convenient for the buyer. Key characteristics of FOB Destination-

• The seller selects the transportation method, carrier, and insurance coverage and includes these costs in the sale price.
• The seller retains responsibility for the goods until they are delivered to the buyer’s designated location.
• Any potential damages or losses during transit are the seller’s responsibility.

3. FOB Stowed

FOB Stowed adds a specific condition to the FOB agreement, relating to the responsibility of the seller for stowing or loading the goods onto the transportation vessel. When “FOB Stowed” is specified in a contract, it means that not only is the seller responsible for delivering the goods to the port but also for properly stowing or loading the goods onto the vessel in a way that ensures their safe transportation. This includes securing the cargo and ensuring it is prepared for the voyage. Key characteristics of FOB Stowed-

• The primary objective of FOB Stowed is to minimise the risk of damage or loss to the goods during loading and transit.
• Since the seller is taking on the responsibility of proper stowing, they may incur additional costs associated with securing the cargo.
• Under FOB Stowed terms, the seller is accountable for the entire loading process, ensuring that the goods are safely placed on board the vessel.
• FOB Stowed is often used in situations where the goods are delicate, perishable, or of high value.