FOB

Definition
INCOTERMS give the standard definition of international trade terms. It tells the parties what to do with respect to carriage of the goods from seller to buyer.
FOB stand for Free On Board, it is one term of INCOTERMS in which “the seller delivers when the goods pass the ship’s rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.”

Advantages
It is necessary to use FOB when the goods are intended to be resold by the buyer before they reach the destination, because this way the buyer can take control of the goods before it arrives at buyer’s premise.
FOB is a good choice for the seller who should refrain from undertaking any additional obligation such as small exporter, because it would be complicated for small exporter to do the contract of carriage out side it’s own country.

Disadvantages
“FOB will not assist the parties in determining exactly how the costs of loading or discharge should be distributed between them. The notion that risks and costs are transferred from the seller to the buyer when the goods pass the ship’s rail is not very helpful for the distribution of the loading costs.”

Conclusion
Each terms of INCOTERMS has it own characteristic to be use in specific situation. FOB would be best suit for buyer who can procure the goods from ship’s rail to its premise, and for the seller who could not provides the carriage of goods out of its own country.

References
http://www.export911.com/e911/export/comTerm.htm
International Chamber of Commerce (ICC)
J. Ramberg, ICC Guide to Incoterms 2000 (ICC Publishing S.A. International Chamber of Commerce, Paris 1999)
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