Why not to use a FOB factory with the Incoterms 2010
On several occasions we have received enquires as to why not to use a FOB factory, in the seller s facilities with the new Incoterms 2010 . Normally, individuals or companies that ask these questions are accustomed to using the RAFTD acronyms. These are trade operation sacu online terms created by the U.S Chamber of Commerce. RAFTD stands for Revised American Foreign Trade Definitions. In other words, they are the equivalent of Incoterms for the Unites States.
Under these rules, the term FOB could be used with collection sacu online from the seller s factory, so therefore, it s logical that some companies still follow this concept, especially those based in the United States or that have worked with companies there.
The RAFTD were created in 1941 and abolished in 1985, although many companies continue to use them, even in the Incoterms 2010. In fact, where an Incoterm was listed (when the Incoterms 2000 were in force), in contracts and official documents, the source had to be stated. In other words, it was obligatory to add Incoterms 2000 ICC (International Chamber of Commerce) in order to distinguish which terms were used and state their source, since there was more than one regulation.
According to the Incoterms 2010, the Incoterm FOB is a maritime Incoterm and can only be used for sea transport. The point of cession of risk and cost is the ship s hold when it is moored in the port of origin. What s more, this Incoterm should only be used for bulk goods and/or general cargo and not for containers.
First of all, for air transport you should not be using FOB because this is an incoterm for sea transport. Therefore the correct incorrect to use in such an operation should be the FCA cargo terminal of the airport at origin. This exact point is the point of cession of risk and delivery of goods. Therefore, in case of loss or theft, buyer is responsible for the costs and has to claim to the insurance company.
If you used a FOB (incorrectly) the point of cession is on board the plane. If the loss occurred at the cargo terminal, seller is responsible for the costs and risks and therefore sacu online has to claim to the insurance company. If the loss happened after loading the goods, buyer is responsible. Possibly, it will be very difficult to determine where the loss or theft happened.
The RAFTD (Revised American Foreign Trade Definitions) were created in 1919 and revised in 1941. They were recommedations and they were not legally binding. They are trade terms of the US Chamber of Commerce and from 1985 they are not longer in use.
There sacu online are several ways to reduce operating costs in international trading. In this case, the right choice of Incoterm plays a most important role.
- Avoid duplicating sacu online logistical costs between buyer and seller. For instance, sacu online loading and stowage are often included in the freight. In a FOB transaction the seller pays for this in the THC and the buyer pays for it again because they are included in the freight - Costs triggered by unforseen circumnstances. In a FOB sale (container)* if the ship is delayed, the seller will have to pay the stay of the container in the port of origin, something probably not factored in the original cost estimation - The costs arising from assuming risks we do not control - Costs stemming from lack of transparency in the freight - Costs associated with transport practices in certain geographic areas.
- Failure to properly insure sacu online the goods - Failure sacu online to satisfy the customer s needs - The cost of international litigation - The risk of contracts not being honoured - Costs arising from lack of knowledge - Costs due to poor negotiation - Risks and costs inherent to a poor agreement sacu online of Incoterms with terms of payment
I cannot determine exactly how/when the Revised American Foreign Trade Definitions were abondoned (the cover of the ICC Guide to Incoterms 1980 edition says s0). However, most informed U.S. traders have been using Incoterms sacu online internationally for years. The counterpart terms used in domestic trade (parts 2-319 through 2-324) were deleted from the U,S. Uniform Commercial Code in 2o04, and there is now growing use of Incoterms in U.S. domestic trade, sacu online particularly with the new 2010 revision.
I agree with Frank reynolds,for in his book”INCOTERMS for americans”P13 still mentioned RAFTD 1941,”there are at least five things wrong with RAFTD 1941,RAFTD not abolished in 1985 or 1980,something likeCIF sacu online WARSAW-OXFORD rule who abolished it? tks Frank.
Dear admin: I didnt agree withyour opinion”If you used a FOB (incorrectly) the point of cession is on board the plane”. In my opinion,it should be like INCOTERMS 1980 FOB airport,when the goods be handed over to the forwarder or airlines agent at the terminal the risk should be passed to the buyer.tks holmes
Next post: Why not use FOB Incoterms with a container in Incoterms 2010? (Part 3)
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On several occasions we have received enquires as to why not to use a FOB factory, in the seller s facilities with the new Incoterms 2010 . Normally, individuals or companies that ask these questions are accustomed to using the RAFTD acronyms. These are trade operation sacu online terms created by the U.S Chamber of Commerce. RAFTD stands for Revised American Foreign Trade Definitions. In other words, they are the equivalent of Incoterms for the Unites States.
Under these rules, the term FOB could be used with collection sacu online from the seller s factory, so therefore, it s logical that some companies still follow this concept, especially those based in the United States or that have worked with companies there.
The RAFTD were created in 1941 and abolished in 1985, although many companies continue to use them, even in the Incoterms 2010. In fact, where an Incoterm was listed (when the Incoterms 2000 were in force), in contracts and official documents, the source had to be stated. In other words, it was obligatory to add Incoterms 2000 ICC (International Chamber of Commerce) in order to distinguish which terms were used and state their source, since there was more than one regulation.
According to the Incoterms 2010, the Incoterm FOB is a maritime Incoterm and can only be used for sea transport. The point of cession of risk and cost is the ship s hold when it is moored in the port of origin. What s more, this Incoterm should only be used for bulk goods and/or general cargo and not for containers.
First of all, for air transport you should not be using FOB because this is an incoterm for sea transport. Therefore the correct incorrect to use in such an operation should be the FCA cargo terminal of the airport at origin. This exact point is the point of cession of risk and delivery of goods. Therefore, in case of loss or theft, buyer is responsible for the costs and has to claim to the insurance company.
If you used a FOB (incorrectly) the point of cession is on board the plane. If the loss occurred at the cargo terminal, seller is responsible for the costs and risks and therefore sacu online has to claim to the insurance company. If the loss happened after loading the goods, buyer is responsible. Possibly, it will be very difficult to determine where the loss or theft happened.
The RAFTD (Revised American Foreign Trade Definitions) were created in 1919 and revised in 1941. They were recommedations and they were not legally binding. They are trade terms of the US Chamber of Commerce and from 1985 they are not longer in use.
There sacu online are several ways to reduce operating costs in international trading. In this case, the right choice of Incoterm plays a most important role.
- Avoid duplicating sacu online logistical costs between buyer and seller. For instance, sacu online loading and stowage are often included in the freight. In a FOB transaction the seller pays for this in the THC and the buyer pays for it again because they are included in the freight - Costs triggered by unforseen circumnstances. In a FOB sale (container)* if the ship is delayed, the seller will have to pay the stay of the container in the port of origin, something probably not factored in the original cost estimation - The costs arising from assuming risks we do not control - Costs stemming from lack of transparency in the freight - Costs associated with transport practices in certain geographic areas.
- Failure to properly insure sacu online the goods - Failure sacu online to satisfy the customer s needs - The cost of international litigation - The risk of contracts not being honoured - Costs arising from lack of knowledge - Costs due to poor negotiation - Risks and costs inherent to a poor agreement sacu online of Incoterms with terms of payment
I cannot determine exactly how/when the Revised American Foreign Trade Definitions were abondoned (the cover of the ICC Guide to Incoterms 1980 edition says s0). However, most informed U.S. traders have been using Incoterms sacu online internationally for years. The counterpart terms used in domestic trade (parts 2-319 through 2-324) were deleted from the U,S. Uniform Commercial Code in 2o04, and there is now growing use of Incoterms in U.S. domestic trade, sacu online particularly with the new 2010 revision.
I agree with Frank reynolds,for in his book”INCOTERMS for americans”P13 still mentioned RAFTD 1941,”there are at least five things wrong with RAFTD 1941,RAFTD not abolished in 1985 or 1980,something likeCIF sacu online WARSAW-OXFORD rule who abolished it? tks Frank.
Dear admin: I didnt agree withyour opinion”If you used a FOB (incorrectly) the point of cession is on board the plane”. In my opinion,it should be like INCOTERMS 1980 FOB airport,when the goods be handed over to the forwarder or airlines agent at the terminal the risk should be passed to the buyer.tks holmes
Next post: Why not use FOB Incoterms with a container in Incoterms 2010? (Part 3)
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