Currently, the exchange of buying and selling goods is taking place regularly between countries. The world also makes laws or policies related to these purchases and sales, with the aim of creating the most favorable conditions for both importers and exporters to promote the import and export balance. However, it is not possible for people in the industry to have a clear understanding of what FOB is as well as related knowledge. So this article will answer some of your questions!
1. Information about fob
What is FOB?
First to understand the concept of fob, we will have a brief look at Incoterms - which stands for international commerce terms, called a set of international trade rules related to the terms of delivery of goods. , will usually include clear provisions as well as specifying the rights in the foreign trade contract.
In essence, the fob is in the delivery terms of the incoterm. FOB English name is free on board, with the content of the terms will stipulate that the seller must fulfill their responsibilities when the goods have been loaded on the deck at the port.
What is FOB?
So if the fob orders have not been loaded on the decks, then the seller is also responsible for the goods, the responsibility will be over when the goods are delivered to the buyer and the deck is cleared. Therefore, shippers pay attention to the risky place of transfer on the ship's rail.
What is the fob price?
FOB prices, also known as free on board, are known to be prices at foreign border gates of the seller. The FOB price will usually include most of the costs of shipping the goods out to the ports, export duties and taxes for export clearance. In particular, the fob price usually does not include the cost of shipping and insurance.
For example, if you buy goods from Phuket port to import to Vietnam through Hai Phong port, then you will have to bear the full cost of freight payments as well as insurance for the goods.
FOB quotes do not include sea freight costs, or ocean freight charges.
What is the FOB value?
According to the information issued, the fob values are the known value of the goods delivered on board the vessel, including costs such as transportation to the port or final destination until before the cargo ships leave the berth. It is known that the value of fob will be calculated according to the general regulations on tariffs and trade.
In addition to the circulars of article VII of the General Agreement on Tariffs and Trade for GATT 1994, the Agreement on Customs Valuation provides further information on CIF values.
2. Responsibilities of the two parties involved in the FOB contract
FOB in export
In the terms of incoterms 2010 clearly stated the responsibility of the payer:
Usually the seller will be responsible for delivering the goods on board the vessel at the port and providing a very complete commercial invoice or electronic document of equivalent value, and providing you with shipping information. menu for you to make proof.
But the buyer is responsible for paying most of the costs of goods to the seller according to the commitments that the contract has clearly stated that the two parties have agreed and signed.
For licenses and procedures
The seller will usually be responsible for always taking the initiative to do the export formalities, to provide the documents related to the export of the eligible shipment to move out.
The buyer must be responsible for preparing the necessary documents such as export papers, customs procedures in accordance with the rules set out by the law, etc.
Contracts of carriage and insurance relating to the two parties:
For the seller will bear the costs and risks contained in the contract to transport the goods from the inland warehouse to the port. The costs of this risk will be terminated in full when the stages pass to the buyer after the goods are loaded on board the vessel.
For the buyer, the responsibility for payment as well as the cost of transporting the goods from the port to the nominated port of final destination, depends on how the two parties have agreed, and especially the buyer is not necessarily required to buy the goods. insurance if they don't want to.
Transfer of risks when the goods have been loaded on board, almost all costs are transferred from the seller to the buyer, at this time the buyer takes some of the risk when the goods have passed the ship's rail. , this risk includes loss in transit of the goods.
Read more: The easiest way to calculate FOB costs today
3. What are the terms related to fob?
Terms related to FOB
Fob shipping point
Translated as fob delivery locations. The shipping point is known to be the place where the delivery may be on the ship's rail. For this place, ownership and responsibility for the goods goes from the seller to the buyer once loaded on board.
Fob destination
Translated as place of destination, this is the reverse case when title and goods will pass to the buyer, once the goods have been delivered to the destinations in the buyer's country.
4. Find out in detail what is a fob condition?
Cargo transportation
Using
As for the mode of transport, the terms used for sea and inland waterways when the shippers have placed the goods on board the designated vessel. FOB will be placed along the side cargo.
Risks when transferring goods
In essence, delivery on board means that the seller has followed the request that the buyer has specified the ship. The risks as well as loss now when moved on board the ship, the buyer fully bear the cost from this point on.
Import and export customs clearance documents
The top condition is the customs clearance documents for the goods. However, the special thing is that the sellers are not obliged to clear the import, ..
5. Distinguish between the two terms fob and cif
Distinguish FOB and CIF
The same point
FOB or CIF are both quite widely used and commonly used terms. Most places of risk transfer are queues. For the seller, always do customs procedures and the buyer will do the import procedures.
Differences
For FOB, it is counted as the port of loading, always loaded with goods to deliver on board, the seller does not participate in ordering the ship, but the new buyer must order the ship. At the stack, there is always a point of transfer of risk and cost for the goods.
For CIF, it is calculated as the port of destination, the goods must be paid for with insurance and freight. Note that with this method, the seller must actively find a method for the shipping unit. The point of transfer of risk will always be the port of loading.
Summary
The above article has provided quite a lot of information related to what is fob and related knowledge. You as a consignee or a buyer should also carefully study the information before signing the agreement. Stay tuned for our posts!