Why not use FOB Incoterms with a container in Incoterms 2010? (Part 4)
In this fourth and last article of the series Why not use FOB Incoterms with a container in Incoterms 2010? we will further analyze more, very specific and specialized criterions due to which we should not utilize FOB Incoterms with containers.
There are many reasons not to use Incoterms FOB with Containers Risk control . Misuse of Incoterms 2010 will carry a great amount of risks in an international transaction. The risk of assuming costs sellers should not assume in the first place (such as the cost for the stay of a container customs officer in an exit port terminal in case the ship is delayed), risk of robbery, customs officer for example during customs officer the same period as the previous example, risk of a contract breach, etc. Logistical concept. At a logistical level the natural customs officer point for merchandise cession is not a ship, but a terminal for containers within a port. It is the point where all may arrive, that won t affect any of the parts involved in case a logistical problem takes place, where no costs are duplicated and it is the natural point where containers are left in a port (within the containers terminal). As such, the Incoterm to be used would be an FCA for the containers terminal inside the port of origin. Note that the International Chamber customs officer of Commerce (ICC) in modifying the guidelines for the Incoterms 2010, has created a new Incoterm that may be used for any mode(s) of transport (it is multimodal), named DAT (Delivered at Terminal). It is an Incoterm thought solely and exclusively to leave merchandise at a terminal, which would be the most logical and natural logistical point for costs and risks transfers, as well as the one that adapts best to the logistical operations of merchandise transport. Professionalism . To me, the main reason why we should correctly use an Incoterm, not only why not to utilize customs officer FOB Incoterms with containers, but also why we should properly use Incoterms 2010 in general, is professionalism. That means that, if we are International Commerce professionals, I believe we should be able to adequately make use of the tools within our reach, and in this case, that means using them 2010 properly.
First, you say THC are often included in the freight, and that is not true. Most of freight quotations (in fact, almost all) do not include THC in the freight, but mention them explicitly as an additional charge (both at the POL and POD). Lines that include THC in their freight are actually very rare (and they do so only on very few destinations). Only Ro/Ro freight customs officer rates include loading/unloading (quay/quay).
Second, you say FOB should only be used for maritime transport, and a container goes by road before and after going by ship. But this is the case for all shipment, every shipment has to go through haulage or fluvial transportation before reaching the ship (may that be a container, break bulk or ro/ro (sometimes)), and after arriving at the port of destination to be delivered customs officer to the buyer.
ICC does not explicitly discourage customs officer FOB s use for FCL cargo as you state. In Incoterms 2010 ICC uses containerized cargo as an example of when FOB may not be appropriate , since cargo is tendered to the carrier at the terminal prior to loading. The operative word is may , which is not explicit in any way, but rather draws attention to an important aspect of the transaction for further consideration.
The reality is that origin terminal handling charges for FCL, particularly in Asia, are not included in the ocean freight and are paid by the shipper under FOB terms. Under FCA terms, the OTHC is paid by the buyer. So for example, what you are suggesting is that a US importer should take on both the added risk and cost of the terminal activity in Asia, as opposed to keeping customs officer that risk and cost local in Asia. From my experience (nearly 15 years in international forwarding, customs brokerage, and ocean transportation), most importers would reject that idea.
We see a majority of US inbound cargo moving effectively under FOB terms. I have yet to see a rational customs officer business reason for why they should change. Their cargo moves on an ocean bill of lading, they are using an ocean term of sale. They only take on cost and risk once the cargo is stowed on board the vessel, a logical approach given an importer’s lack of control of or visibility to work done at an origin terminal. Perhaps there is a reason this has become the industry standard in some routes, commonly accepted by many industry professionals..
Recent Posts Incoterms 2010: What s the difference between CIP and CIF Incoterms? Why not use FOB Incoterms with a container in Incoterms 2010? (Part 4) Why not use FOB Incoterms with a container in Incoterms 2010? (Part 3) Why not to use a FOB factory with the Incoterms 2010: the RAFTD are to blame. Why can t FOB be used with a container in the Incoterms 2010? Part (2) Categories CIF Incoterms DAP Incoterms FOB Incoterms Inco
In this fourth and last article of the series Why not use FOB Incoterms with a container in Incoterms 2010? we will further analyze more, very specific and specialized criterions due to which we should not utilize FOB Incoterms with containers.
There are many reasons not to use Incoterms FOB with Containers Risk control . Misuse of Incoterms 2010 will carry a great amount of risks in an international transaction. The risk of assuming costs sellers should not assume in the first place (such as the cost for the stay of a container customs officer in an exit port terminal in case the ship is delayed), risk of robbery, customs officer for example during customs officer the same period as the previous example, risk of a contract breach, etc. Logistical concept. At a logistical level the natural customs officer point for merchandise cession is not a ship, but a terminal for containers within a port. It is the point where all may arrive, that won t affect any of the parts involved in case a logistical problem takes place, where no costs are duplicated and it is the natural point where containers are left in a port (within the containers terminal). As such, the Incoterm to be used would be an FCA for the containers terminal inside the port of origin. Note that the International Chamber customs officer of Commerce (ICC) in modifying the guidelines for the Incoterms 2010, has created a new Incoterm that may be used for any mode(s) of transport (it is multimodal), named DAT (Delivered at Terminal). It is an Incoterm thought solely and exclusively to leave merchandise at a terminal, which would be the most logical and natural logistical point for costs and risks transfers, as well as the one that adapts best to the logistical operations of merchandise transport. Professionalism . To me, the main reason why we should correctly use an Incoterm, not only why not to utilize customs officer FOB Incoterms with containers, but also why we should properly use Incoterms 2010 in general, is professionalism. That means that, if we are International Commerce professionals, I believe we should be able to adequately make use of the tools within our reach, and in this case, that means using them 2010 properly.
First, you say THC are often included in the freight, and that is not true. Most of freight quotations (in fact, almost all) do not include THC in the freight, but mention them explicitly as an additional charge (both at the POL and POD). Lines that include THC in their freight are actually very rare (and they do so only on very few destinations). Only Ro/Ro freight customs officer rates include loading/unloading (quay/quay).
Second, you say FOB should only be used for maritime transport, and a container goes by road before and after going by ship. But this is the case for all shipment, every shipment has to go through haulage or fluvial transportation before reaching the ship (may that be a container, break bulk or ro/ro (sometimes)), and after arriving at the port of destination to be delivered customs officer to the buyer.
ICC does not explicitly discourage customs officer FOB s use for FCL cargo as you state. In Incoterms 2010 ICC uses containerized cargo as an example of when FOB may not be appropriate , since cargo is tendered to the carrier at the terminal prior to loading. The operative word is may , which is not explicit in any way, but rather draws attention to an important aspect of the transaction for further consideration.
The reality is that origin terminal handling charges for FCL, particularly in Asia, are not included in the ocean freight and are paid by the shipper under FOB terms. Under FCA terms, the OTHC is paid by the buyer. So for example, what you are suggesting is that a US importer should take on both the added risk and cost of the terminal activity in Asia, as opposed to keeping customs officer that risk and cost local in Asia. From my experience (nearly 15 years in international forwarding, customs brokerage, and ocean transportation), most importers would reject that idea.
We see a majority of US inbound cargo moving effectively under FOB terms. I have yet to see a rational customs officer business reason for why they should change. Their cargo moves on an ocean bill of lading, they are using an ocean term of sale. They only take on cost and risk once the cargo is stowed on board the vessel, a logical approach given an importer’s lack of control of or visibility to work done at an origin terminal. Perhaps there is a reason this has become the industry standard in some routes, commonly accepted by many industry professionals..
Recent Posts Incoterms 2010: What s the difference between CIP and CIF Incoterms? Why not use FOB Incoterms with a container in Incoterms 2010? (Part 4) Why not use FOB Incoterms with a container in Incoterms 2010? (Part 3) Why not to use a FOB factory with the Incoterms 2010: the RAFTD are to blame. Why can t FOB be used with a container in the Incoterms 2010? Part (2) Categories CIF Incoterms DAP Incoterms FOB Incoterms Inco
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