Basic tips to exporter while contracting terms of delivery on FOB basis


The Exporter and Importers may use latest version of Inco Terms 2020 for movement of their goods.  Click here to read the content of Incoterms 2020, easily explained


If you are an exporter, very new to the business, you need to fix the price of selling cost with foreign buyer. You are a machine exporter near Mumbai, India and you need to sell your product to the buyer in New York. You know that under C&F transaction, the freight has to be paid by you (seller). You work out your selling cost of goods as USD 5000, if you sell the said machinery at your factory premises, without meeting any other expenses. As you know, FOB means ‘ Freight on Board’ and you need to meet all the expenses up to ‘on board’ of Aircraft or ‘on board’ of the ship. So what is your responsibility while fixing the FOB cost of your product? You need to find the total expenses to be incurred up to ‘on board’ of the carrier of goods. Let us discuss the costs involved to find FOB expenses. The Goods are at your factory in Mumbai, India. The distance from your place to Mumbai is - say about 50 miles. You need to work on the following to get exact FOB expenses:Basic tips to exporter while contracting terms of delivery on FOB basis copy

1. Find out the transportation cost to move goods from your place to Mumbai port from local transporters. Remember, unlike local transport, some of the international ports both airport and sea port may have certain schedule for unloading your cargo to the specific booked flight area or shipping slot to unload, which may get delayed in un loading. So get a sound knowledge with experienced transporters to avoid detention charges for waiting. By taking in to consideration of the same, you got a quote for the transportation charges.

2. Contact a Customs House Agent to get the customs clearance quote to handle your shipment.

3. In each port, there will be a port handling agencies, where in you have to pay the handling charges. Collect the tariff from them with the help of clearing and forwarding agents (CHA) or freight forwarders. This is an actual receipted bill which you can demand from the Customs House Agents to whom you have appointed to customs clear the cargo.


4. If the cargo has to be shipped via sea, shipping line charges terminal handling charges and BL documentation charges which may also be taken in to consideration while fixing up an FOB cost.

5. If the buyer needs cargo by sea and you (exporter) are away from sea port and you need service of CFS/ICD dry port, you can move cargo to nearest dry port of CFS/ICD and arrange to customs clear the cargo and send the shipment to the sea port. Shipping and freight forwarding company will help you in extending service. Here, you need to pay the charges of transportation from dry port of CFS/ICD to sea port.

You can works out the total expenses of the above as FOB charges and fix up your selling FOB cost. If the total expenses of above expenses works out to USD 300, then the total FOB Mumbai selling cost is USD 5300.

Inco Terms for movement of goods is revised as Incoterms 2020.  The importers and exporters are suggested to use the latest versionClick here to read the contents of Inco Terms 2020.

Detailed articles about Inco Terms of Delivery under export and import of International business  have been mentioned in  separate category – INCO TERMS – in this web site.  You can click here to read.


The above information is a part of Export Import Online Tutorial


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Mr Anand.Patil: If In FOB Cases the customer does not lift up the cargo from Port of loading ( Containers are sent by importer on port of loading ) how should the problem be diagnosed ( Purchase order has been released and canceled and material is lying on port of loading ) Please provide remedies to this question 2)if are dealing through cash against documents or acceptance SGS on port of loading has been done physically and at final point customer rejects the proposal what shall be done ( ECGC is also done ) Please provide remedy to this clause 3) Can 10 types of different material requirements can be incorporated in Single LC AT SIGHT OR NOT Please provide remedy to this clause

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