In international trade transactions, determining liability for shipping delays under FOB terms remains a frequent pain point. Clear contractual frameworks and understanding of commercial obligations are essential for risk mitigation.
In global commerce, FOB (Free On Board) remains one of the most commonly used trade terms, yet it continues to generate disputes when shipping schedules deviate from planned timelines. While Incoterms® 2020 provide standardized guidance, practical application requires careful attention to contractual details and commercial realities.
Deliver goods onboard the vessel at the named port of shipment by the agreed date
Handle export clearance and provide compliant shipping documentation
Bear all risks and costs until goods pass the ship's rail at loading port
Ensure goods conform to contract specifications and quantity requirements
Arrange and pay for main carriage from loading port
Provide timely vessel particulars including ship name, loading port, and expected time of arrival
Secure cargo insurance and assume risks after goods pass ship's rail
Effect payment as contractually agreed and take delivery
The pivotal moment when responsibility transfers from seller to buyer occurs when goods pass the ship's rail at the named port of shipment. This demarcation line fundamentally determines liability for delays.
When the buyer doesn't arrange timely vessel nomination or the designated vessel fails to arrive as scheduled, the buyer typically bears responsibility for resulting costs including storage, insurance, and market value losses.
Practical Example: A European buyer delayed vessel nomination for Chinese rice shipments by three months. The arbitrator held the buyer liable for deterioration costs and storage expenses during the delay period.
If the buyer's vessel arrives as scheduled but the seller cannot complete loading due to production delays or documentation issues, the seller generally assumes responsibility. Standard contracts often include liquidated damages clauses (typically 1% of contract value per day of delay, capped at 10%).
Under the CISG Article 79, parties may be exempt from liability for failures caused by impediments beyond their control (war, natural disasters, government actions). The affected party must provide prompt notification and official evidence.
Port congestion, labor strikes, or carrier scheduling issues often lead to shared responsibility. Contracts should explicitly address how such delays and associated costs will be allocated between parties.
A Chinese chemical exporter faced 15-day delays when the buyer's nominated vessel was denied entry due to seaworthiness concerns. The missed delivery window resulted in significant market losses.
Resolution: The buyer was found liable for failing to exercise due diligence in vessel selection. Damages covered storage costs and market value differential.
A Middle Eastern crude oil purchase was delayed when the seller's loading agent failed to comply with customs formalities, resulting in vessel detention and demurrage charges.
Resolution: The seller was held responsible for non-compliant documentation, though government-related delays were partially excused under force majeure provisions.
Clearly define delivery windows and consequence of delays
Specify force majeure events and evidence requirements
Include detailed demurrage calculations and liability caps
Establish protocols for renegotiation following force majeure events
Buyers should verify vessel specifications and port compliance in advance
Sellers should maintain production buffers and monitor progress against milestones
Both parties should establish clear communication channels for exception reporting
Consider cargo insurance for high-value shipments
Specify international arbitration (LCIA, ICC, or HKIAC) for dispute resolution
Choose governing law appropriate to the transaction (CISG, English Law, or NY Law)
Define evidentiary standards and notice requirements
Liability for FOB shipping delays primarily depends on:
Which party's action or inaction caused the delay
Whether the risk transfer point has been reached
Contractual allocations of responsibility
Applicability of force majeure provisions
International traders should prioritize precise contract drafting, maintain proactive communication, and implement robust risk management strategies. When disputes arise, parties should seek resolution through established contractual mechanisms rather than immediate litigation.
Well-drafted contracts, combined with professional execution and cooperative problem-solving, provide the best foundation for successful international trade relationships under FOB terms.
This analysis is provided for informational purposes only and does not constitute legal advice. Parties should consult with international trade professionals for specific guidance.
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