What is FOB?

What is FOB?

FOB is one of the international trade terms, the English full name is Free On Board(... named port of shipment), i.e. free on board (... Named port of shipment), commonly referred to as the port of shipment. FOB is also known as "FOB" (price excluding freight).

01

Eligible:

FOB term is limited to sea and domestic trade transportation.

02

Influencing factors:

The Seller may, at the Buyer's request and at the Buyer's risk and expense, assist in obtaining a bill of lading or other transport document.

03

Features:

T/T(advance payment) and FOB trade terms are a commonly used combination to effectively control the potential risks under this trade term. Europe and the United States choose FOB trade terms more.

04

Obligations of the buyer and seller:

The Seller shall bear all risks until the goods are loaded on board and the Buyer shall bear all risks after the goods are loaded on board from the port of loading. FOB terms require the seller to clear the goods for export.

05

Calculation formula:

FOB={{1-[tax rebate rate /(1+ VAT rate)]} × RMB tax inclusive price}/ spot exchange buying price

FOB USD price =[FOB RMB price × (1+ tariff rate)]/ USD spot exchange buying price (in case of export tariff)

06

Common misunderstandings:

The term FOB applies when the seller is responsible for delivering the goods on board the vessel at the port of shipment. However, FOB may not be the best option for some buyers, especially if they have limited experience with shipping and customs clearance procedures.

FOB price only includes the transaction price of the goods on board the vessel at the loading port, excluding freight and insurance charges. Some buyers may mistakenly believe that the FOB price already includes all costs, leading to problems with subsequent payments and fees.

What is FAS?

FAS is one of the international trade terms, the English full name is Free Alongside Ship (... named port of shipment), i.e. delivery alongside ship (... Named port of shipment). It means that the seller delivers the goods stipulated in the contract to the designated port of loading within the agreed time, and the buyer's designated ship side to complete the delivery obligation, such as placing them on the dock or barge.

01

Eligible:The FAS term applies only to sea modes of transport.

02

Influencing factors:

The Seller bears the risks and costs prior to delivery, which may vary from port to port and affect the quotation.

03

Features:

The risks and expenses of both parties shall be bounded by the ship's side, and all risks and expenses shall be borne by the buyer after delivery. In foreign trade, the seller often adopts the method of delivery alongside the ship in order to exempt himself from certain obligations.

04

Obligations of the buyer and seller:

FAS requires the Seller to clear export customs, but the seller is not obliged to clear import customs, pay any import duty or complete any import customs formalities. The Seller is responsible for entering into an appropriate contract of carriage with the carrier to ensure that the vessel arrives at the port of shipment on time.

05

Common misunderstandings:

The delivery method is FAS beside the ship, and the delivery to the carrier is FCA, pay attention to the distinction.