FOB (Free On Board) Incoterm

The principle of FOB (Free On Board) Incoterm is that the seller is responsible for the goods until they are loaded onto the ship at the designated port of shipment. Once the goods are on board, the responsibility is transferred to the buyer. The buyer is then responsible for shipping costs, insurance, and any risks from the point the goods are on the ship onwards.
Therefore, key aspects customers need to understand for standard international trade are as follows.

1. Risk Transfer After Goods Are Onboard: Under the rules of FOB, the risk associated with the goods transfers to the buyer when the goods are loaded onto the ship. If the goods are damaged or lost afterward, the responsibility falls on the buyer.
2. Proof of Delivery Under FOB: Proof of delivery can be provided once the goods are loaded onto the ship and have gone through the export process. This includes documents such as the Bill of Lading, which confirms the goods are in the correct condition at the time of loading.
3. Insurance After Goods Are Onboard: Since the buyer assumes responsibility for transportation once the goods are loaded, the buyer should insure the goods in case of damage. If damage occurs during transportation, the buyer should contact their insurance company.

Regulations on Claims for Goods under Standard International FOB Procedures

1. Objective

To establish clear guidelines and procedures for claims under the FOB sales process, ensuring transparency for both buyers and sellers to follow international standards.

2. Scope

These regulations apply to FOB (Free On Board) transactions, where the seller is responsible for the goods until they are loaded onto the ship. Risks and responsibilities transfer to the buyer immediately thereafter.

3. Conditions for Product Claims

3.1 Seller’s Responsibility

• The goods do not meet the contractual requirements, such as quality or specifications, before being loaded onto the ship.
• Issues arise from improper packaging or preparation of the goods by the seller.

3.2 Buyer’s Responsibility

• Damage occurs after the goods are loaded onto the ship, such as improper storage or transportation.
• The buyer does not inspect or test the goods at the delivery point.

3.3 Claim Procedures in All Cases

• The buyer is required to record a video to confirm that the problematic goods are indeed from the seller.
• The video must be taken at the delivery location immediately and must clearly show details such as.
• Unpacking the goods.
• Condition of the goods upon receipt.

If the buyer does not provide the required video evidence, the claim will be considered invalid.

4. Claim Procedure

4.1 Reporting the Issue

• The buyer must notify the seller of the problem within 7 business days of receiving the goods.
• The buyer must provide.
• The video recorded at the delivery location.
• Additional reports such as photos or inspection documents from a third party

4.2 Inspection

• The seller will review the evidence received and has the right to appoint a third party to assess the dispute.
• If the video does not meet the requirements, the seller has the right to reject the claim.

4.3 Decision

• If the issue is the seller’s responsibility.
• The seller must refund part or all of the payment, or
• Ship new goods.
• If the issue is the buyer’s responsibility, or if the video evidence does not meet the requirements, the seller can reject the claim.

5. Additional Requirements

5.1 Delivery with Certificate of Quality

• The seller must provide a certificate of quality and test reports from a standard factory lab along with the goods.

5.2 Buyer’s Duty to Inspect

• The buyer is responsible for
• Sending someone to inspect at the delivery location, or
• Hiring a third-party company for inspection.
• If the buyer does not carry out the inspection as required, the goods will be considered accepted.

5.3 Mandatory Video Evidence

• The video must be taken immediately at the delivery location and show
• The goods in their packaging
• The unboxing process
• The condition of the goods upon receipt

Without clear video evidence, the claim will be considered void.

6. Dispute Resolution

•If a dispute arises over a product claim, both parties can opt for negotiation, arbitration, or proceed according to the law specified in the contract.

7. Enforcement:

These regulations are part of the FOB sales contract and apply to all transactions. The inclusion of video evidence in these regulations helps reduce disputes and enhance transparency in the claims process.