What is FOB?
FOB is one of the international trade terms, and its full English name is Free On Board (... named port of shipment), which means delivery on board (... named port of shipment), commonly known as delivery on board (FOB). FOB, also known as "FOB" (price excluding freight).
01
Eligible:
FOB terms are limited to sea freight and domestic trade transportation.
02
Influencing factors:
At the request of the buyer and at the buyer's risk and cost, the seller may provide assistance in obtaining the bill of lading or other transportation documents.
03
Features:
T/T (advance payment) and FOB trade terms are a commonly used combination that can effectively control the potential risks under this trade term. Europe and America often choose FOB trade terms.
04
Obligations of both parties:
The seller shall bear all risks until the goods are loaded onto the ship, and the buyer shall bear all risks after the goods are loaded onto the ship from the loading port. The FOB term requires the seller to handle customs clearance procedures for the export of goods.
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Calculation formula:
FOB={{1- [Tax refund rate/(1+value-added tax rate)]} × RMB tax inclusive price}/spot exchange purchase price
FOB USD price=[FOB RMB price] × (1+tariff rate)/USD spot exchange purchase price (with export tariffs)
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Common misconceptions:
The FOB term applies to situations where the seller is responsible for delivering the goods to the vessel at the loading port. However, for some buyers, FOB may not be a better choice, especially in situations where there is limited experience in transportation and customs clearance procedures.
The FOB price only includes the transaction price of the goods on board the ship at the loading port, excluding freight and insurance costs. Some buyers may mistakenly believe that the FOB price already includes all costs, leading to issues with subsequent payments and fees.
What is FAS?
FAS is one of the international trade terms, and its full English name is Free Alongside Ship (... named port of shipment), which means delivery by ship (... named port of shipment). Refers to the seller delivering the goods specified in the contract to the designated loading port within the agreed time, and the buyer completing the delivery obligation by the designated ship, such as placing them on the dock or barge.
01
Eligible:
The FAS term only applies to sea transportation methods.
02
Influencing factors:
The seller bears the risks and costs before delivery, which may vary depending on the port and affect the quotation.
03
Features:
The risks and expenses of both parties shall be borne by the buyer after delivery, with the ship as the boundary. In foreign trade, sellers often adopt the method of delivery alongside the ship in order to exempt themselves from certain obligations.
04
Obligations of both parties:
FAS requires the seller to handle export customs clearance procedures, but the seller is not obligated to handle import customs clearance, pay any import taxes, or handle any import customs procedures. The seller is responsible for signing an appropriate transportation contract with the carrier to ensure that the ship arrives at the loading port on time.
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Common misconceptions:
The delivery method on the ship's side is FAS, and the delivery to the carrier is FCA. Please pay attention to distinguishing.
Source: Souhang Network
