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What is the FOB price? What should be done once the goods are released without documents?

Date: 2022-07-05

FOB price

FOB price, also known as "free on board price", abbreviated as FOB, is one of the commonly used trade terms in international trade. Refers to the sales price from the port of shipment to the destination, which is borne by the buyer and not included in the settlement price.

In fob transactions, the Buyer shall send a vessel to take delivery of the goods and the Seller shall load the goods on a vessel appointed by the Buyer at the port of shipment and within the time specified in the contract and notify the Buyer in time. Risks shall pass from the seller to the buyer when the goods are loaded on board a named vessel at the port of shipment.

In this term, the risk we need to bear is to deliver the goods to the designated place of the customer's forwarder, but we should pay attention to the cost in this term.

The cost composition is: domestic freight + port local incidentals, generally we tend to omit the port local incidentals.

Since the fees charged by the customer's designated freight forwarder are higher than our own freight forwarder, we must pay special attention to the quotation to the customer or this is the point where our profit will be reduced.

When we quote fob to the customer, the price we quote to the customer is composed of: domestic freight + local port fees + cost of goods. We must not write FOB into EXW to calculate the cost, otherwise part of the cost will be lost, maybe that part of the cost is our own profit.

When we know that there is a FOB price, there must be a CIF price. For a long time, people used to refer to FOB terms in international trade as "FOB price", which also refers to the term "CIF" containing freight and insurance.

But the real CIF is not CIF, but DES. DES means delivered on board the ship at the port of destination, the seller must be responsible for the delivery of the goods to the ship at the port of destination, responsible for all costs and risks before the arrival of the goods, the goods on board the disposal of the buyer, but do not go through the import customs clearance procedures, the seller will complete the delivery.

CIF is not CIF because the risk transfer limit of CIF is also at the side of the ship of shipment, not at the port of destination. The term CIF refers to delivery on a pro forma basis, that is, after delivery at the ship's side at the port of shipment, the risk is passed to the consignee and delivery is not required to the customer's designated port.

Clinch a deal the CIF price terms of the contract, for example, if the carrying vessel has not left the port of shipment on the rocks and the buyer to the seller is unable to submit a claim, the reason is that after across the ship's rail in the risk is transferred to the buyer, the buyer can only claim for compensation according to insurance contract to the insurance company, it shows that the seller is not responsible to the port of destination for risk. So we should not mistake CIF for CIF.

Fob for we pay special attention to the issues of the miscellaneous expenses of port of shipment, as we talk to the customer after all expenses can we know the customer's designated forwarder information, so we missed the know at that time the customer designated forwarder charge standard, then the cost for us and our budget will cause a certain loss for us.

Therefore, after we talk about the trade terms with the customer, we will ask the customer to specify the forwarder information to check with them how much the local port miscellaneous fees for our shipment are, so as to make the most accurate quotation and do not let our budgeted profits go away like this.

How to release goods without a single?

FOB means the buyer designates the carrier (usually a foreign forwarder and its agent in China and the buyer controls the shipment. The forwarder often obeys the buyer, even is directly controlled by the buyer; No single release of goods usually happens in this kind of situation!

This type of trade usually produces two sets of bills of lading: east shipping bill and forwarder's bill. The shipper should book shipping space from the shipping company by himself or his agent and get the east shipping bill. Domestic exporters get a bill of lading or even no bill of lading) issued by their forwarder and shippers and receivers are usually shown as sellers and buyers.

After the forwarder obtains the east shipping bill from the shipping company, it can be directly sent to the foreign agent and the foreign forwarder can pick up the goods from the shipping company after receiving the east shipping bill. Whether the foreign forwarder needs to retrieve the forwarder bill when delivering the goods to the actual consignee is another matter. Once the foreign forwarder does not require the consignee to return the original bill of lading when delivering the goods to the consignee, then the bill of lading in the consignor's hands can be identified as waste paper in a sense.

Which mode of delivery is safer?

Facts have proved that in export business, as the seller according to the specific situation of the transaction, it is very necessary to carefully choose the appropriate trade terms to prevent the risk of foreign exchange collection and improve economic benefits. Here are some points to pay attention to when choosing trade terms.

Generally speaking, it is more advantageous to use THE term CIF or CFR than FOB in export business. Because, under CIF condition, the three contracts involved in the international sale of goods (sales contract, transport contract and insurance contract) by the seller as its party, he can according to the situation of overall arrangements for goods, shipping, insurance and other matters, to ensure the operation process of mutual connection. In addition, it is conducive to the development of the country's shipping industry and insurance industry and increase the income from service trade. Of course, this is not absolute, should be based on the specific situation of the transaction of goods should first consider their own arrangements for transport without difficulties and whether the economy is cost-effective and other factors.

The risk of FOB also lies in that if the designated forwarder cannot book the shipping space directly, but books the shipping space through other professional airlines, there is no real control over the property right in the transportation, which leads to the timely solution of the transportation problems.

The seller may say, we are not responsible for the FOB shipment, it has nothing to do with us and I don't need to worry about it. Precisely this view has some problems, because when the goods transport route is a multiple choice, when the transport time is longer, the increase is the increase of the manufacturer's capital flow cycle. For example, for the same trip to South America, some ships need about 60 days to sail and some only need half of the time (I will not say the specific ship company, manufacturers remember to inquire about the voyage when booking space, this is very important), which will delay the time to collect money from customers. Sometimes, in order to reduce the transportation cost, the consignee does not hesitate to designate a ship with a longer voyage for transportation. Such behavior is understandable. Of course, some manufacturers are willing to take a ship with a longer voyage for storage reasons, which can reduce the storage cost. If the value of the goods is small, then nothing can be seen. If the value of the goods is large, the customer's slow payment speed will lead to the uncertainty of the exchange rate problem. I think the manufacturers have a deep experience of it.

If no other option but to use FOB terms (notes)

1. The time when the buyer sends a ship to the port for loading shall be clearly stipulated in the contract, so as to avoid the delayed arrival of the ship when the goods are ready by the seller and the delayed shipment date.

2. Increase the proportion of deposit and reduce the probability of customers turning back. When the freight way ao however customer, in terms of payment must hold the bottom line, would rather earn less or do not do business, also can't take the risk of losing money.

3. In the trade contract, the buyer and the seller agree that the forwarder company is not necessarily limited to one company. If the carrier and the bill of lading are not put on record with the Ministry of Communications of China, we should be careful. (The record bill of lading and the carrier are required to post a deposit, which makes the bill of lading relatively safe.) If buyers want to be paranoid about their opinions, sellers need to consider the risks. Accept well-known shipping company and insist on using shipping company's BILL of lading, avoid using designated overseas forwarder and bill of lading issued by them as far as possible. At the same time, the owner shall require our our forwarder outside agent at the port of shipment formalities issue the letter of guarantee, commitment is specified overseas forwarder to arrange the transport of the goods at the port of destination must be under l/c by bank transfer after the original bill of lading release cargo, otherwise will bear the liability for shipment release without collection bill of lading only in this way, once appear, the situation of the shipment release without collection bill of lading, in order to have a basis for the claim.

4. In the case of FOB export, it must be specified in the contract that the shipper entrusts the forwarder or nVOCC to book shipping space with the shipping company and the right to book shipping space cannot be given to the buyer, because the booking and delivery obligations are unified. The name of shipper (seller) must be filled in the shipper field in the bill of lading. Consignor mastered entrust booking space right, also mastered the control right of goods. If the buyer is in good standing and has a requirement to resell the goods in transit, the buyer may be used as the shipper. If buyer's credit is not known, it is safe to take seller as shipper.

5. It is also advisable to use an order bill of lading to open an l/C to the consignee. This allows the bank to keep a tight grip on the rights to the goods and prevents the risk of releasing goods without a bill of lading.

6. Hedge risks by investing in Citic Insurance. Before investing, we should know the countries and regions where they are not insured and the blacklisted customers and learn more about the cases rejected by Sinosure to avoid further problems.

Once there is no single mortgage, how to do the seller?

Online advice including find embassies, international lawsuit, various blacklist, looking for a Courier company, not to mention the customer is professional fraud, will a wily rabbit has three burrows have several companies, do you have any criminal background, in these threats are care, just to go overseas to follow up to avoid costly, burn out, then don't have to do the business.

Real right is the most important thing in foreign trade, don't immerse yourself in bargaining all day and fall into the trap set by others. Again, prevention is better than cure.

Source (Shipping Network)