𝗠𝗮𝗿𝗶𝗻𝗲 𝗜𝗻𝘀𝘂𝗿𝗮𝗻𝗰𝗲 𝗨𝗻𝗱𝗲𝗿 𝗙𝗢𝗕 — 𝗞𝗻𝗼𝘄 𝗘𝘅𝗮𝗰𝘁𝗹𝘆 𝗪𝗵𝗲𝗿𝗲 𝗬𝗼𝘂𝗿 𝗥𝗶𝘀𝗸 𝗘𝗻𝗱𝘀
FOB is the most commonly used Incoterm in Indian exports — and also the most commonly misunderstood when it comes to who insures what, and when.
🔹 Under FOB (Free On Board), the seller's responsibility — and insurable interest — ends once the goods are loaded on board the vessel at the named port of shipment.
🔹 Unlike CIF, FOB places 𝗻𝗼 𝗼𝗯𝗹𝗶𝗴𝗮𝘁𝗶𝗼𝗻 on the seller to arrange marine cargo insurance at all. Insurance is entirely the buyer's responsibility from the point of loading onward.
🔹 This creates a dangerous gap for Indian exporters: cargo sitting at the port, during loading, or even in pre-shipment inland transit is often assumed to be "covered" when it may not be, unless the seller has arranged separate cover for that leg.
🔹 The moment the goods pass the ship's rail (in practice, once safely on board), risk transfers to the buyer — even if the seller is still handling documentation, customs clearance, or payment collection.
🔹 Many exporters continue to hold financial exposure after risk transfer because payment isn't yet received — insuring only against physical loss of cargo misses this. Trade credit or payment-risk cover should be considered separately from marine cargo cover.
🔹 Inland transit to the port — factory to CFS/ICD to vessel — is frequently uninsured under FOB unless the exporter arranges a separate inland transit policy, since FOB terms don't address this leg at all.
🔹 FOB is designed for conventional break-bulk or bulk sea cargo. For containerized shipments, FCA (Free Carrier) is the more accurate equivalent, since risk transfer at "ship's rail" is poorly defined once goods are stuffed in a container at an inland point.
📌 Bottom line: Under FOB, "the buyer insures the shipment" is only half true. The seller still carries exposure — inland transit, loading risk, and payment risk — that FOB terms alone don't cover. Knowing exactly where documentary risk ends and financial risk begins is what protects an exporter's bottom line.
