Break free and expand your business from Malaysia and Singapore to Southeast Asia, USA and beyond.

Learn more

FOB Free On Board's Meaning in Shipping

Benedict Leong

Containers being loaded onto a freighter

FOB value… FOB incoterms… we tend to see the term FOB popping up in places from international procurement to deals with between bulk sellers and buyers. If you are new to shipping, you may see the term FOB pop up in multiple places with seemingly different meanings.

We’ll break down what FOB means as an incoterm and also what FOB value means when it comes to customs clearance.

FOB Free On Board as an Incoterm:

 

Incoterms (short for International Commercial Terms) are a set of rules created by the International Chamber of Commerce which defines whether a seller or buyer is responsible for the costs and risks associated with delivering goods. Seller, in this case, refers to the exporter or shipper, while buyer refers to the recipient or consignee. The latest version of the incoterms are Incoterms 2020.1

Free On Board (FOB) is an Incoterm where the seller is responsible for shipping charges and is liable for the goods up until the goods pass the railings of the outbound ship. Once the goods pass the ship’s railings, the buyer will be liable for the goods and covers the costs of shipping. Whether you’re a buyer or seller, be sure to work with an international shipping and freight forwarding expert you can rely on.

What the Seller is Responsible for in a FOB Arrangement

Origin warehouse – where the goods are held prior to the delivery. This could be the seller’s own warehouse or their carrier’s warehouse, such as a Free-Trade Zone warehouse or regional distribution centre.

Transportation to the origin port – first mile delivery from the origin warehouse to the port. If you’re working with Janio, we’ll handle this leg of the delivery after you’ve dropped it off at any of our designated drop-off points.

Documentation – The seller needs to provide the following documentation: Bill of Lading, Commercial invoice, insurance certificate, packing list and export license.

Origin customs clearance – Origin customs clearance, also known as export clearance is still under the responsibility of the seller.

What the Buyer is Responsible for in FOB

Line-haul to last mile freight – the buyer is responsible for arranging transportation from line-haul, to unloading and last-mile delivery along with their respective costs.

Working with a freight forwarding partner with a strong line-haul and domestic shipping network can go a long way in optimising your costs and delivery timings.

Destination customs clearance – The buyer will be responsible for import clearance for the shipment.

In addition to requiring the documents provided by the seller earlier, import licenses and other documentation like business registration or tax ID’s will be needed depending on the destination country.

Destination warehouse – where the buyer will store the delivered shipments. This can be either the buyer’s in-house warehouse or one run by their carrier, like a distribution center.

Insurance – As the goods are the buyer’s responsibility during the line-haul journey, the buyer is usually responsible for insuring the goods.

What does FOB Value Mean in Customs Clearance?

Terms like FOB value and CIF value are sometimes used by countries when calculating the customs value of a shipment.

The FOB value of a shipment is the price of the goods and any costs incurred by the seller in getting the goods ready for export, such as packing costs. Countries like Australia2 and the USA3 calculate the customs value of goods based on how much the ‘transaction value’ or the ‘price actually paid or payable’ by the importers are. This amount does not include costs related to international freight or insurance.

CIF value on the other hand includes the FOB costs along with the costs of international freight and insurance as well. This method is used by countries like Singapore, Malaysia, and Indonesia.

Navigating these differences in customs clearance between countries can get tricky at times. Working with experienced forwarders with customs expertise like Janio can help minimise the chances of your shipments facing issues in customs.

 

Whether you’re a seller or a buyer in a FOB shipping arrangement, Janio wide logistics network and range of services have you covered. Whether you need an end-to-end solution or just one service from customs brokerage, international line-haul, or domestic shipping our flexible options always have the right fit for your shipping needs. To get a quote or to find out more about our services, reach out to us via the banner below!

 

Need to Ship to Southeast Asia via Sea, Air or Cross border Trucking? Get a quote here!

References:

  1. Incoterms® 2020 – ICC 
  2. Australian Border Force – Valuation of Imported Goods
  3. USA Customs Border and Protection – Customs Valuation Encyclopedia   
900 views

You might also be interested in

Singapore eCommerce: 2020’s COVID-19 Economic Overview and Opportunities
Benedict Leong
Singapore eCommerce: 2020’s COVID-19 Economic Overview and Opportunities

Discover how COVID-19 has changed consumer behaviour and purchases in Indonesia - from eCommerce statistics to what they're buying online

670
Malaysia eCommerce: 2020’s COVID-19 Economic Overview and Opportunities
Benedict Leong
Malaysia eCommerce: 2020’s COVID-19 Economic Overview and Opportunities

Discover how COVID-19 has changed consumer behaviour and purchases in Malaysia - from eCommerce statistics to what they're buying online

667
Indonesia eCommerce: 2020’s COVID-19 Economic Overview and Opportunities
Benedict Leong
Indonesia eCommerce: 2020’s COVID-19 Economic Overview and Opportunities

Discover how COVID-19 has changed consumer behaviour and purchases in Indonesia - from eCommerce statistics to what they're buying online

500
Air Freight from China to Singapore
Air Freight from China to Singapore

How do parcels enter Singapore from China via air freight? What kind of customs documents do you need to clear SG customs? Find out here!

Learn More
Shipping from China to Singapore
Shipping from China to Singapore

How do parcels enter Singapore from China via air or sea? What kind of customs documents do you need to clear ID customs? Find out here!

Learn More
Ship From China and Hong Kong to Indonesia
Ship From China and Hong Kong to Indonesia

How do parcels enter Indonesia from China via air or sea? What kind of customs documents do you need to clear ID customs? Find out here!

Learn More

Connect with us

Subscribe to our email newsletter and receive the latest news and insights into the world of
eCommerce and logistics in Southeast Asia.

   
Stay updated and follow us