By John Privette
Wyoming Small Business Development Center Network
International trade involves a lot of rules, regulations and terms that can be confusing to a small business owner, but that shouldn’t stop you from expanding your market outside of the United States. Free on Board (FOB) is one of the oldest shipment-delivery terms in the books and sets the conditions for when the seller is free of all risks in regard to the exporting process.
Here’s what you need to know about FOB if your business is currently exporting outside of the U.S. or is looking to do so in the future.
According to the Incoterms 2010 rules (the standards for trading terms and conditions), FOB means the Seller (exporter) fulfills delivery obligations and ends their risk when goods are loaded onboard the vessel appointed by the Buyer at a specified port or waterway on the seller’s side.
The FOB condition only applies under the following criteria:
* Restricted to sea and inland waterway transport.
* Buyer selects freight forwarder, contracts carriage, and pays for freight to destination.
* Neither the Seller nor the Buyer have any obligation to each other to obtain a contract for insurance.
* Applies to goods lifted across the ship’s rail (except containerized shipments), liquid cargo transferred to the ship in hoses and loose bulk cargo filled from silos.
Having an understanding of these conditions beforehand allows you to evaluate the obligations and risks involved when exporting and preparing a sales contract.
Exporting your product may seem like a daunting task, but there is plenty of help available in Wyoming.
If you have more questions about FOB, Incoterms 2010 or anything else related to exporting, get in touch with me for no-cost confidential advising at jprivett@uwyo.edu.
There is more on this topic right now on the blog section of our website at WyomingSBDC.org.
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