Under the FOB terms, does the consignor still have to bear these expenses?

We all know that FOB is also called Free On Board.For FOB transactions, the buyer is responsible for sending a ship to pick up the goods.The risk is transferred from the seller to the buyer when the goods are loaded on the named vessel at the port of shipment.

What expenses should the consigner bear under the FOB terms?

1. Regular payable expenses

We all know that under FOB terms, the consignor is generally only responsible for the port of shipment charges, that is, the charges before boarding the ship, including: pick-up charges, packing charges, port miscellaneous charges, port safety charges, bill of lading fees, manifest entry fees, terminal handling charges (THC) or origin surcharge (ORC), lead sealing charges, customs clearance charges, etc.

Special attention should be paid to the declaration fees for manifests such as AMS of the United States and ENS of the European Union. Since they are all declared before loading at the port of departure, these fees are also those incurred before "offshore" and should generally be borne by the shipper.Of course, the customer agreed to bear this part of the cost except.

2. Expenses for unexpected situations

1. Charges for improper connection of cargo

FOB, cargo connection is the key.If the ship can not be loaded into the port in time, the freight and demurrage will be borne by the shipper.On the contrary, it is too early to prepare and load the container, and the overdue container cost, storage cost and so on should also be borne by the shipper.Therefore, FOB should confirm the shipment date and the loading port again and again, keep close communication to ensure the connection of the shipment and cargo.

2. Expenses incurred by unclaimed delivery at the destination port

For some reason, after the goods arrived at the destination port, the consignee did not take delivery of the goods and did not pay the freight. At this time, the carrier could not recover the freight in time, but also faced with the situation that the goods would be auctioned by the local customs or generate high storage charges.Therefore, it is possible to request payment to the consignee first, and then to the consignor after failure. 

Sea freight: in principle should be borne by the consignee first, when no delivery, it may be returned to the shipper;

Pick up: first notify the consignee to pick up, no pick up, notify the shipper to deal with, such as return or resale;

Demurrage charges and demurrage charges at destination port: demurrage charges and demurrage charges are incurred when no one takes delivery of the goods. If the goods do not cover the cost, the shipper may be required to bear them.

3. High appointed agency fees

Designated freight forwarders often give much higher costs than general freight forwarders.This is because the freight forwarding department consignee designation, that is, the consignee and freight forwarding concluded the contract of carriage, not the seller.The forwarder is responsible to the consignee.

There is no direct contractual relationship between the shipper and the forwarder, so there is no possibility of bargaining.Therefore, a series of charges for the port of departure given by the designated freight forwarder will be relatively higher than that of the general freight forwarder.This part of the difference, if not too much, in order to send the goods smoothly, the consignor only reluctantly accept the high cost standard.

4. Compensation for cargo damage

When the container is opened at the port of destination and the cargo is damaged, the consignee shall assume the responsibility under FOB.And consignee bought insurance commonly, can apply for insurance to compensate.But if not, the consignee may still negotiate with the shipper.

If the cargo damage is caused by the consignor's careless packing, careless inspection of the cabinet or other special circumstances before the ship, the consignor shall be liable for the cargo damage to a certain extent, which shall be handled through negotiation and compensated accordingly.If you can prove that it is not your own responsibility, you can take out the packing photos, packing list or other supporting materials and ask the consignee to claim compensation from the ship.

5. No loss due to cargo release

Under FOB terms, the shipper is more of a designated freight forwarder than a designated shipping company.However, as the designated forwarder usually maintains a close business relationship with the consignee, so the designated forwarder is very likely to release the goods directly to the consignee without the original bill of lading, that is, to release the goods without the bill of lading, resulting in the consignor holding the bill of lading, but actually the payment has been empty, resulting in heavy losses.

6. "soft pit" of letter of credit

The soft terms of l/c are the terms set by the applicant in the l/c. Such terms will lead to threats to the beneficiary's safe receipt of foreign exchange, and give the applicant the trading initiative or the benefit of swindled goods and prepayment.

If the consignor does not pay attention, if the documents submitted are inconsistent with the letter of credit, the consignor will be refused payment, and the consignor will be put in a passive position after shipment, which will lead to a dilemma and the payment will be damaged.

3, summarize

Therefore, we must have the risk control consciousness to ship goods by sea.

If you can try to use CIF or CFR, try not to use FOB terms

Try to use shipping company bill of lading instead of forwarder bill of lading.

When accepting a designated forwarder, the qualification of the forwarder must be carefully reviewed

Care must be taken to control ownership of the goods,

The bill of lading should be issued with great caution.Do not accept the request of the other party as the shipper of the bill of lading, and try not to accept a straight bill of lading, and do not make it a bill of lading to the order of the consignee.

Cover land risks to eliminate the insurance blind spot between the shipper's warehouse and the port of shipment.

The contract and l/c must be carefully examined to avoid soft terms and strictly comply with the requirements of the contract and l/c when issuing all documents.

Insurance related to export credit insurance to hedge the risks and convert to quote shipping network in this paper