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How does payment work in an FOB destination port situation from a Chinese import perspective?

August 29th, 2011 No comments

Payment terms for an FOB product in China can be from 20%-50% initial deposit/down payment to begin manufacturing/assembly of the product. Once completed and ready for delivery the supplier will load the product into the container (FCL and LCL) and export it to be loaded onto the container ship at the port.

The product will then be shipped to the destination port. At this point the B/L (Bill of Lading) is exchanged for the remainder of the order value. Once this has been exchanged, the product is in the custody of the purchaser or the shipping agent/freight forwarder that has been enacted.

Depending on the agreement the buyer has with the shipping agent/freight forwarder the product can be managed all the way to the buyer’s door from when the shipping agent takes custody.

How does payment work in an FOB port of loading situation from a Chinese export perspective?

August 29th, 2011 No comments

Payment terms for an FOB product in China can be from 20%-50% initial deposit/down payment to begin manufacturing/assembly of the product. Once completed and ready for delivery the supplier will load the product into the container (FCL and LCL) and export it to be loaded onto the container ship at the port.

At this point the B/L (Bill of Lading) is exchanged for the remainder of the order value. Once this has been exchanged, the product is in the custody of the purchaser or the shipping agent/freight forwarder that has been enacted.

Depending on the agreement the buyer has with the shipping agent/freight forwarder the product can be managed all the way to the buyer’s door from that point onward.

How to calculate this into your overall costs involving FOB?

August 29th, 2011 No comments

FOB as explained before covers the cost of your product either until your shipment is loaded or until it has arrived at your destination port.

If it is FOB destination port, then the purchaser has to pay for:

  1. Shipping Fee.
  2. Customs fee at the destination port.
  3. Duty on the product if it requires any (Your will have to research this or shipping agent should be able to classify the product.
  4. Once released, delivery to the final destination as listed on the shipping documents.

The purchaser can do this whole procedure themselves but it is highly advisable and both economically and time efficient to enact a shipping agent or freight forwarder to take care of this for them.

If it is FOB port of loading, then the purchaser has to pay for points 2-4 as above.

What is FOB?

August 29th, 2011 No comments

As a general term, FOB means ‘Freight On Board’ or ‘Free On Board’ as it is more generally used in international shipping. This means that the seller will pay for the goods to be loaded onto the vehicle of transport.

The term FOB can be used to clarify which part of the shipment is being paid for by the supplier and which part is to be paid for by the purchaser.

For instance FOB, (port of loading) indicates that the seller will pay for the goods to be loaded onto a vehicle of transport (usually a container ship) at the initial port only. Shipping, Duty, Customs clearance and delivery to final location will be paid by the purchaser. Usually this is a shipping agent as nominated by the purchaser.

FOB, destination port indicates that the shipping fee will be paid by the seller/supplier. Duty, customs clearance and delivery to final location will be paid by the purchaser.

For a more in depth understanding of the term FOB, contact your shipping agent or get in touch with us with an explanation of the shipping situation.