By Benny  Lim.     Photo：Mikhail Nilov

Under FOB term, shipper should be more careful on considering whether to accept an overseas freight forwarder appointed by consignee. In recent years, it has often happened that the buyer/importer colluded with their freight forwarder and asked carrier to release the cargo without a bill of lading, and this bringing in shipper for losing both money and goods.So, how did cargo release without a bill of lading occurred?

FOB means that forwarding side is designated by buyer/importer (usually an oversea freight forwarder and it’s agent in Asia), the buyers/importers control the transportation, the freight forwarder often comply with buyer, or even directly controlled by them, and cargo release without B/L usually occurs under such circumstances.

After the freight forwarder gets the bill of lading (MASTER B/L) from carrier, it can be directly sent to their own agent. After receiving the MBL, the freight forwarder can clear the goods and pick up the goods. Whether the freight forwarder needs to take back the bill of lading (HOUSE B/L) when delivering the goods to consignee is different matter. Because the freight forwarder does not require the consignee to return the original bill of lading once the goods are delivered to the consignee, the BL that holds in shipper can be regarded as waste paper.

The another risk of FOB term is if the designated freight forwarder cannot directly get the space with carrier, but through out the other freight forwarders, under the layer upon layer, that’s brings no actual control over the property rights in the transportation, if there any issue occurred during the transportation , it cannot be solve in a timely manner.

Many shipper or retailers might say that we are not responsibility under FOB shipment, it has nothing to do with them, and they don't need to worry about it. In fact there still exist some other issue, when the route had a multiple-choice, the transit time being delayed, it increasing of the capital circulation cycle of shipper. Especially the transit time from Asia to Europe and the United States are generally more than 30 days or even longer, and it causing the shipper receiving payment from buyer.

The purpose of consignee under the FOB terms also to control the inventory cost of purchasing. They are don’t mind on choosing a more longer transit time on sailing the goods to arrive their door. In order to reduce transportation costs, this is understandable. Addition, some of the shippers are willing to use a more longer transit time to reduce the warehouse costs.

The size of goods value slower the payment speed of the customer will also lead to the uncertainty of the exchange rate issue, and the exchange rate difference caused by the payment at that time can only be absorbed and borne by the consignor silently. Therefore, shippers need to be more cautious and careful.

Which delivery method is more safer?

It is more advantageous to use CIF or CFR terms in export trade than using FOB. Under the CIF term, three contracts (sales contract, transportation contract and insurance contract) involved in the international sale of goods is the main person in charge.

If trade goes by FOB terms:

1. The time for the buyer to send the ship to the port to load the goods should be clearly stipulated in the contract, so as to avoid the occurrence of delays in the delivery due to the seller's goods being ready and the freight forwarder failing to get the shipping date within the specified time.

2. Increase the deposit ratio to reduce the probability of customers breaking their promises. When the freight method and freight forwarding can only be determined by the customer, the bottom line must be kept in terms of payment method, and it is better to earn less or not to do business, and not risk losing money.

3. In the trade contract, the buyer and the seller agree on the freight forwarding company, which is not necessarily limited to a certain one. If the carrier and the bill of lading have not been filed with the Ministry of Communications of China, then you have to be careful. (The recorded bill of lading and the carrier need to pay a deposit, which makes the bill of lading relatively safe.) If the buyer insists on being paranoid about his own opinion, the seller must consider the risk. Accept well-known shipping companies and insist on using the shipping company's bill of lading, and try to avoid using the designated overseas freight forwarder and the bill of lading issued by it.

4. At the same time, the owner of the goods should ask the freight forwarder in my country to issue a letter of guarantee when handling the formalities of the port of shipment on behalf of the overseas freight forwarder, promising that the goods arranged by the designated overseas freight forwarder must be delivered with the original bill of lading circulated by the bank under the letter of credit after arriving at the port of destination, otherwise they will be charged Liability for compensation for delivery of goods without a bill of lading, only in this way, once the goods are delivered without a bill of lading, can there be a basis for claiming.

5. In the case of FOB export, it must be clear that the buyer entrusts the freight forwarder or NVOCC to book the space with the shipping company, and the right to book space cannot be handed over to the buyer, because the obligations of space booking and delivery are unified. The shipper (shipper) column in the bill of lading must fill in the name of the shipper (seller). The consignee has the right to entrust the booking space, If the buyer's has a good credit and there is a requirement to resell the goods in transit, it is also acceptable to use the buyer as the shipper. If you do not know the credit of the buyer, it is safer to use the shipper for safety reasons.

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