FOB Explained for Steel Structure Exports

FOB Explained for Steel Structure Exports

FOB — Free On Board is one of the most widely used terms in international trade. In plain terms: the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, and risk passes to the buyer from that moment. For steel structure suppliers, FOB is often the default quotation basis for overseas projects — so it is worth being precise about what it does and does not cover.

The Basic Rules

• The buyer arranges the vessel. The buyer books space or charters the ship; the seller delivers the goods on board at the agreed port and within the agreed period, and notifies the buyer promptly.
• Risk passes on board. Under the older wording, risk passed when goods crossed the ship's rail; since Incoterms 2010 the trigger is goods placed on board the vessel.
• Sea and inland waterway only. FOB is not appropriate for air, rail or pure road transport — for containers moving door-to-door, FCA or CIP usually fits better.

Who Does What

Where the Risk Line Actually Sits

The practical consequence is simple but often misunderstood: the seller is responsible until the goods are on board, and the buyer is responsible from that point — including the ocean freight, insurance and any loss during the voyage. Two implications follow for exporters:

• Loading cost is the seller's. Any cost incurred to get the cargo from the port gate to on board — terminal handling, lifting, lashing within the loading operation — sits with the seller unless the contract says otherwise.
• Insurance is the buyer's decision. FOB does not oblige either party to insure. The seller's exposure ends on board, but until then the cargo is typically uninsured unless the seller arranges cover.

Two Details That Cause Disputes

1. The US and Canada require the word "Vessel." In North American practice, FOB without the word "Vessel" may be read as delivery at any location within the city, not on board a ship. Always write it in full: FOB San Francisco Vessel.

2. Variations exist to allocate loading costs. Because "on board" can be interpreted several ways at the terminal, the trade has developed standard variants that should be written into the contract explicitly:

• FOB liner terms — loading costs are handled as they would be under a liner service;
• FOB under tackle — the seller's cost ends when the cargo is under the ship's hook;
• FOB stowed / trimmed — the seller also bears the cost of stowing and trimming the cargo in the hold.

Why It Matters More for Steel Structures

Steel structure cargo behaves differently from general containerised goods. Members are long and heavy, shipments frequently move as break bulk or in flat racks, and loading calls for cranes, spreaders and lashing rather than a simple container lift. In an FOB sale the buyer's nominated vessel may arrive with lifting gear that does not match the cargo — and any delay, re-handling or stevedoring cost generated at that interface is exactly where FOB disputes start. Three precautions are worth taking:

• Agree the loading method and lifting points in the contract, not at the quay;
• Confirm the vessel's gear capacity against the heaviest bundle before nomination;
• Fix storage and demurrage responsibility if the vessel arrives late — under FOB, the seller's clock keeps running while the cargo waits at the port.

Quick Checklist Before You Quote FOB

1. Named port of shipment written exactly as it appears in the shipping schedule;
2. Loading cost allocation stated (liner terms, under tackle, stowed or trimmed);
3. "Vessel" wording included for US and Canadian destinations;
4. Notice period for vessel nomination and for delivery readiness defined;
5. Documents list agreed — bill of lading, packing list, certificate of origin, mill certificates, inspection reports.

Used precisely, FOB keeps the quotation clean: the seller controls what happens up to the ship, the buyer controls the voyage. Ambiguity lives almost entirely in the loading operation — and that is where the contract should be most specific.