Which statement correctly describes FOB (Free On Board) Incoterm?

• A. The seller's obligation ends when goods pass the ship's rail.
• B. The seller must pay the cost, insurance, and freight to the destination.
• C. The seller bears costs and risks to named place ready for unloading.
• D. The buyer bears all costs and risks when goods are loaded on the vessel.

Answer: (C)

FOB assigns the seller responsibility up to the point the goods are loaded on the vessel at the named port, with export clearance handled by the seller. The moment the goods pass the ship’s rail and are on board, risk transfers to the buyer. From that point on, the buyer bears all costs and risks for the main carriage, insurance (if any), and all further handling, including unloading at the destination. So, the seller’s obligation ends at loading onto the ship, and the buyer takes over thereafter.

The description that the seller bears costs and risks to a named place ready for unloading fits a Delivered at Place Unloaded scenario, not FOB. Statements suggesting the seller must pay to the destination or that the buyer bears all costs and risks at loading don’t align with FOB’s split of responsibilities.