The Impact of Free on Board (FOB) Shipping on International Commerce

This report examines the concept of Free on Board (FOB) shipping within the context of international commerce. It defines FOB as a term used in global trade to specify the point at which the responsibility for costs, obligations, and risks associated with goods delivery transfers from the seller to the buyer. The report highlights that FOB contracts are governed by Incoterms and are primarily applicable to waterway or sea freight that is not containerized. The report also discusses the significance of FOB in determining the basis of payment for freight charges and the point at which the title of goods shifts from the seller to the buyer. It explores the obligations of both the buyer and seller, including who assumes control, risk, and responsibility for transportation and insurance. Additionally, the report touches upon the relevance of international trade law, cargo ownership, and the role of FOB in contracts involving items susceptible to theft or damage. The report concludes with a list of relevant references that support the information presented.

Running Head : International commerce and Free on Board shipping
INTERNATIONAL COMMERCE AND FREE ON BOARD SHIPPING
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1International commerce and Free on Borad shipping
Introduction
The term Free on Board is legislation in global trade that specifies the point at which
cost, respective obligations and risk engaged in goods delivery transfers from the seller of the
contractual goods to the buyer. The delivery of commercial goods under the terms of free
onboard is under the standards of Incoterms which is circulated by a foreign chamber of
commerce. FOB is applied only in the case of waterway carriage or sea freight which is not
containerized1. The term FOB is used in contemporary domestic shipping to define the shipping
point at which there is no obligation lies upon the seller of goods for shipping expenses. FOB is a
term used in the international trade law which designated the cost of contracted goods to involve
delivery at the expense of the seller at a particular point2. The term FOB is used to determine the
basis and obligations for making payment relating to freight charges. Secondly, the shipping
point where the title shifts from the seller of the goods to the buyer3. The buyer in FOB assumes
1 Abrahamsson, Bernhard J. International Ocean Shipping: Current Concepts and Principles.
Routledge, 2019.
2 Shadikhodjaev, Sherzod. "The “Regionalism vs Multilateralism” Issue in International Trade
Law: Revisiting the Peru–Agricultural Products Case." (2017) Chinese Journal of International
Law 16.1: 109-123.
3 Patalinghug, Epictetus E. "A Study on International Shipping in the Philippines." (2019).

2International commerce and Free on Borad shipping
the control and title of goods the time the lading bill is signed by the carrier. The transportation
risk is assumed by the buyer and is authorized to direct the shipment. The buyer is also obliged
for prosecuting claims for damage or loss4. The legislation concerning global trading involves
appropriate customs and rules for dealing with commerce among the nations. The branch of
legislation becomes a liberal area of research as government authority becomes the participants
of international trading as an associate of the World Trade Organization. Cargo ownership is
sovereign from Incoterms5. In international commerce, cargo ownership is well-defined by
waybill or lading bill. The FOB port implies that the seller of the goods makes payment of goods
transportation to shipment port in addition to that loading expenses. The buyer makes the
payment of transport, unloading, insurance. Cost for transportation of marine freight from the
point of entrance harbor to the ultimate destination. The shifting of risk happens where the
contracted goods are shipped at the shipment point. The contract of FOB necessitates the seller
for delivering the commercial goods on inter which is elected by the buyer. The obligation of
FOB contracts is compiled by the seller at the time when the contracted goods are carried to ship
rail. The international convention on sales of goods concerning customs and rules on the passing
4 Ashiquzzaman, Md. "A Review of International Trade Law." (2018) International Journal of
Tax Economics and Management .
5 Baldwin, Richard. "The World Trade Organization and the future of multilateralism." (2016):
Journal of Economic Perspectives 30.1 95-116.

3International commerce and Free on Borad shipping
of risk and title, delivery, payment and price of goods, assignment and variation, remedies and
enforcement liability exclusion, choice of jurisdiction, legislation and arbitration. It donates to
the overview of the regulation that regulating trade remedies, goods storage, importation,
restrictions on international trade and exportation. The contracts that involve international
transportation often cover abbreviated terms on trade that define the issues such as place and
time of delivery of goods and payment at the moment when the peril of loss shifts from the seller
of the goods to the buyer. Thus Free onboard is very significant to the parties in international
business and in specific for the contracts that involve items exposed to theft or delicate items.

4International commerce and Free on Borad shipping
Bibliography
Abrahamsson, Bernhard J. International Ocean Shipping: Current Concepts and Principles.
Routledge, 2019.
Baldwin, Richard. "The World Trade Organization and the future of multilateralism." Journal of
Economic Perspectives 30.1 (2016): 95-116.
Patalinghug, Epictetus E. "A Study on International Shipping in the Philippines." (2019).
Shadikhodjaev, Sherzod. "The “Regionalism vs Multilateralism” Issue in International Trade
Law: Revisiting the Peru–Agricultural Products Case." (2017) Chinese Journal of International
Law 16.1: 109-123.
Ashiquzzaman, Md. "A Review of International Trade Law." (2018) International Journal of
Tax Economics and Management.