FOB Explained: The Hidden Risk in Your Turkish Sourcing You Can't Afford to Ignore
The Sourcing Glossary
Introduction
If you've ever sourced products from Turkey, or anywhere overseas, you've seen the letters FOB. It's perhaps the most common shipping term in global trade, the default choice for thousands of transactions every single day.
But here’s the critical point: FOB is one of the most misunderstood Incoterms, and that misunderstanding can cost your SME thousands of euros. Many buyers assume the supplier covers more than they actually do, creating a dangerous gap in your insurance or logistics chain.
This post, the first in our "Sourcing Glossary" series, will cut through the jargon. Our goal is simple: to give you a clear, practical, and actionable understanding of FOB (Free On Board) so you can negotiate confidently and protect your bottom line.
The 30-Second Definition
FOB (Free On Board) is an Incoterm (International Commercial Term) that defines two crucial things:
- When the cost transfers.
- When the risk transfers.
The key feature of FOB is that the seller (your Turkish supplier) fulfills their obligation when the goods are loaded on board the vessel nominated by you, the buyer, at the named port of shipment in Turkey (e.g., Izmir or Istanbul).
In a nutshell: The seller gets the goods to the ship; you take it from there. The moment the last box crosses the ship's rail, the shipment becomes your full financial and legal responsibility.
The "Free" Trap (The Common Misconception)
The most common and dangerous error in dealing with FOB is the misunderstanding of the word "Free."
It has nothing to do with cost-free shipping. The "Free" in "Free On Board" simply means the seller is responsible for getting the goods free of any charge to the buyer up to the point they are loaded on the vessel.
What FOB is NOT:
- It is NOT "free shipping" to your German, French, or Italian warehouse.
- It is NOT a term where the seller is responsible for the international freight cost or the risk of damage during the sea voyage.
- It is NOT the seller's duty to clear the goods for import into your country (that’s always the buyer's job).
Breakdown in Practice: A German Buyer & A Turkish Supplier
Imagine your Berlin-based company is buying a container of furniture from a supplier in Bursa, Turkey, under the terms FOB Gemlik Port.
The following table clearly defines where the responsibilities lie.
The #1 Mistake & How to Avoid It
The single biggest practical error European SMEs make when using FOB is failing to secure adequate insurance for the international leg of the journey.
Because the risk transfers at the point of loading in Turkey, many buyers mistakenly assume the seller’s standard liability or insurance will cover the goods. It won't. If the ship sinks, if a container is damaged, or if there is a general average declaration (where losses are shared), the liability falls entirely to you, the buyer, unless you have a separate policy.
How to Avoid It (Actionable Strategy):
- Always Insure: Treat the moment of loading in Turkey as the start of your own self-insurance obligation.
- Use Your Freight Forwarder: When you book your main carriage (shipping), ensure the quote from your freight forwarder explicitly includes "All Risks" marine cargo insurance covering the voyage from the Turkish port to your European destination. Never rely on the carrier's minimum liability.
Comparison & Context
Verdict for European SMEs sourcing from Turkey:
FOB is often your best choice. It gives you control over the main freight cost, allowing you to leverage your relationship with a reliable, known European freight forwarder for the longest and riskiest part of the journey. This control is key to managing your supply chain effectively and saving money.
Your Next Step
Mastering terms like FOB is what will separate you from competitors who lose money on hidden logistics costs. But this is just the beginning.
To build a truly resilient and cost-effective supply chain in Turkey, you need a continuous stream of actionable insights.
Here's how you can dive deeper:
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