/ By TJ China Freight / Cargo • China Freight News • FBA • International

Definition of Shipping Incoterms 2023

Incoterms are international commercial terms that usually appear in international sales contracts defining the responsibility of all parts when its comes to the transportation and delivery of goods. They are widely used by businesses around the world and recognized by different countries.

Here are the common 11 incoterms, and each with unique terms and stages of the transfer of responsibility from the seller to buyer.

EXW – Ex Works or Ex-Warehouse: The seller is responsible for packing the products and making the goods available. The cargo is transferred to the buyer while the freight is still at the seller’s site. The buyer is then responsible for exporting, shipping, and importing the cargo to their destination.

FCA – Free Carrier: The seller is responsible for transporting the cargo to a defined destination within the seller’s country, usually a shipping terminal. Once the load has arrived at the designated destination, the shipment transfers to the buyer, the buyer then must pay the freight charges and fulfill the importing and delivery process. Depending on the named place, the cargo is either exported by the seller or the buyer.

FAS – Free Alongside Ship: The seller must manage the full export process of the cargo until the goods are alongside the ship or other mode of transport. Once alongside the ship, the risk is transferred to the buyer. The buyer is responsible for loading the cargo onto their desired vessel and shipping the goods to their final destination.

FOB – Free On Board: The seller must manage the full export process of the cargo, and load the products on the ship. Once the cargo has been safely loaded, the products transfer to the buyer. The buyer must pay for the freight costs that transport the goods to their destination and is responsible for all import costs.

CFR – Cost and Freight: The seller is responsible for transporting the cargo to the buyer’s port. Once the goods have arrived at the port, the responsibility transfers to the buyer. The buyer then must unload the cargo and import the goods into the destination country, followed by importing and delivering to the final destination.

CIF – Cost, Insurance & Freight: The seller is responsible for the costs to ship and insure the cargo to the buyers requested port. Once the goods arrive at port, the responsibility of the goods transfers to the buyer. The buyer then must cover the costs to unload, import, and deliver their shipment. CIF requires the seller to purchase freight insurance.

CPT – Carriage Paid To: The seller must ship and unload the cargo from the vessel at the defined place of delivery. Once the goods are unloaded, the cargo transfers to the buyer, who is then responsible for importing and transporting the freight to the final destination.

CIP – Carriage & Insurance Paid: The seller must cover the costs to ship and insure the cargo to the defined place of delivery. The shipment transfers to the buyer after the cargo is unloaded and delivered to the terminal.  After the goods are unloaded and delivered to the defined terminal, the shipment transfers to the buyer. The buyer must import and fulfill the remainder of the shipping process to move the goods to the final destination. CIP requires the seller to purchase freight insurance.

DAP – Delivered at Place: The seller must deliver the cargo to the final, defined destination. Once delivered the cargo transfers to the buyer. The buyer must unload the shipment from the truck. The buyer is also responsible for import duty, taxes, and customs clearance.

DPU – Delivered at Place Unloaded: The seller must deliver and unload the cargo to the final destination. Once the shipment is successfully unloaded at the buyer’s warehouse, the responsibility transfers to the buyer. The buyer is responsible for import duty, taxes, and customs clearance.

DDP – Delivered Duty Paid: The seller is responsible for delivering the cargo to the final destination, and paying the import duty, taxes, and customs clearance. Once the cargo arrives at the destination, the responsibility transfers to the buyer, who must cover the costs to unload the shipment. DDP is the only Incoterm that requires the seller to pay all duty charges.

When you are looking for a trusted China freight forwarder to help you arrange the cargo from China to your countries, TJ China freight co., ltd is always your best partner!

/ By tjchinafreight ivy / Shipping

6 common Incoterms mistakes to avoid

6 common Incoterms mistakes to avoid
6 common Incoterms mistakes to avoid

Incoterms are an essential part of any international ocean cargo. It is established by the International Chamber of Commerce or the ICC and sets out clear guidelines that buyers and sellers must execute transactions according to the parts of the transaction identified by each Incoterm.

Incoterms establish rules and responsibilities for both parties that can be used to resolve differences in the event of a dispute. The choice of Incoterm is determined and agreed upon by the buyer and the seller, who not only understand the responsibilities involved with each Incoterm, but also ensure that he/she is able to meet them.

Despite its importance and the potential consequences of misuse, many buyers and sellers are still unaware of some of the key responsibilities of every Incoterm.

In this article, we'll cover the six most common mistakes in Incoterms listed in Incoterms 2010.

1. Containerized goods use FOB

Despite common belief and practice, FOB Incoterm should only be used for non-contained ocean freight. This error is so common that it becomes a misunderstanding that is deeply ingrained in the minds of importers and exporters.

The main risk involved is the port of origin. Under FOB, the risk is formally transferred when the cargo is loaded on board. However, it is common practice for the shipper to hand over the cargo to the carrier at the terminal awaiting loading.

Since the cargo is at the dock, it has not yet been considered on board. Any damage sustained during this period is still technically the shipper's responsibility and the shipper's insurance should cover this part of the process as well.

However, when disputes arise, the shipper can and does often argue that he has done his part. So, in order to avoid hassle, delays and, more importantly, disputes that can lead to a deterioration in the relationship with the supplier, often the result is that the consignee has to bear the cost.

Apart from FOB, FAS, CFR and CIF are also not suitable for containerized cargo due to the above reasons.

2. Do not specify a location

Many people are unaware that Incoterms rules allow specifying locations. In fact, the failure to specify the full address may be controversial, as the ambiguity allows the seller to choose any delivery point he wishes within the general location provided.

This may be inconvenient for the buyer at all, especially if he has to spend extra time and money to transfer the goods to the final location he originally booked.

3. Seller commits to DDP or DAP without checking if he/she can handle import responsibility in buyer country

Under DDP and DAP, the seller is responsible for paying all arrival charges at the destination. With DDP, this includes paying local taxes (eg GST, VAT, etc.) and handling customs clearance at the destination. Note that unlike DDP, DAP does not require upfront customs clearance fees.

The latter requires him to register as an overseas importer in the destination country, a country-dependent process that can require a lengthy and lengthy program.

4. Buyer uses EXW regardless of his/her influence in the export process

This is similar to the role-reversal point of view mentioned earlier. Under EXW, the seller's responsibility is minimal and ultimately ends with the correct packaging of the item.

From then on, the buyer is responsible for export procedures from the country of origin and any necessary communication with the exporting authorities. For the buyer, it may not be that simple, especially if he/she is not familiar with the export process in the country of origin. In some cases, the seller may be required to participate.

5. Using CIP or CIF without checking that insurance coverage is adequate and complies with commercial contract requirements

According to CIP and CIF Incoterms, sellers are obliged to insure the goods. According to Incoterms rules, only minimum coverage (110% of contract value) is required.

However, depending on the conditions of the contract of sale, this may be insufficient and insufficient for the item being shipped. This amount needs to be met if the commercial contract requires more coverage.

6. Failure to align Incoterm with the bank's payment security requirements

This applies to international payment methods, such as letters of credit, whose secure and reliable nature suggests a lack of complete trust between buyers and sellers.

For letters of credit, payment can only be made after submitting the required documents to the bank to demonstrate that the trading conditions have been met.

/ By tjchinafreight ivy / Shipping

Import from China: FOB, CIF or EXW Incoterm?

Import from China: FOB, CIF or EXW Incoterm?
Import from China: FOB, CIF or EXW Incoterm?

FOB, CIF or EXW? The Incoterm you choose to import from China can greatly affect your overall cost. But oddly, it's rarely the focus of your import activity.

Most importers tend to put the lowest possible sales price as a higher priority, ignoring other details. This could end up being a costly mistake. Given their direct impact on import costs, now is the time to start taking a closer look at Incoterms.

Product prices vary by Incoterm

The price of your purchase will vary depending on whether you imported using FOB Incoterm, CIF Incoterm or EXW Incoterm. Many Chinese suppliers include shipping costs directly into the product price, which is why they usually have different price lists depending on the Incoterms used.

Be very careful when negotiating with Chinese suppliers here, as the price difference does not always correspond to the price of sea freight. Suppliers have been known to use this to manipulate buyers into choosing a specific Incoterm that is more beneficial to the supplier. This will be explained further when we discuss the CIF Incoterm.

Incoterms determine the control you have

The Incoterm you choose will define your control over your shipment at every stage of the shipping process. Whoever controls ocean shipping has control over costs and greater bargaining power.

If you let the supplier manage the ocean freight, you must accept the price and conditions he sets with the freight forwarder.

Import from China with FOB Incoterm

FOB Incoterms are probably the favorite - and in some cases only - Incoterms of experienced importers. We are talking about countless imported products with different characteristics, each with their own unique needs.

In my opinion, if you can only choose one Incoterm to import from China, FOB Incoterm will be your best choice. Why? FOB Incoterm gives you more control over your imported ocean cargo without the responsibilities that come with it.

Import FOB and EXW from China

As mentioned, the biggest advantage of using FOB to import from China is the control you have. You also have less responsibility than EXW.

For FOB, your responsibility as the importer is freight, cost of arrival and delivery. This means that any problems at the origin will be the responsibility of your supplier in China. However, with EXW, you are responsible for any problems and unexpected expenses - both at the origin and destination.

In short, while both FOB and EXW Incoterms are considered safe options for importers, there are significant differences in how responsibility is allocated.

Import from China using CIF Incoterm

Buyer's responsibility: payment of goods, arrival fee, customs clearance at destination, inland transportation at destination from port to warehouse, and corresponding import duties.

Responsibilities of the seller: deliver the goods according to the conditions agreed with the buyer, obtain the necessary documents for export, manage the inland transportation in China, manage the customs clearance and pay the corresponding customs fees in China, rent and pay the sea freight, insurance, and original Origin port charges.

For a novice importer, a CIF Incoterm may look very tempting: no need to pay for shipping, no need to choose or negotiate with a freight forwarder, no need to organize shipments, and most importantly, the item is actually cheaper than buying under another Incoterm they.

Import from China using EXW Incoterm

Buyer's Responsibilities: Pay for the goods, manage inland transportation at origin and destination, pay origin, ocean freight, insurance, manage customs clearance at origin and destination and pay appropriate fees, and pay appropriate customs duties.

Seller's Responsibilities: Deliver on the terms agreed with Buyer, provide all required documents and proofs.

What is the best Incoterm when importing from China?

In theory, FOB, CIF and EXW are your viable options for importing from China. Each involves a different amount of risk, liability, cost, and safety.

My advice

Choose the safest Incoterms that give you maximum control over your ocean freight.

/ By tjchinafreight ivy / Shipping

International Cargo Booking Service from China

International Cargo Booking Service from China
International Cargo Booking Service from China

Booking is simply the process of booking a space for your cargo from a shipping company in order to use their shipping company. This article explains some of the main steps to take before booking a LCL shipment with a freight forwarder. These precautions help you handle LCL shipments with your forwarder for smooth delivery and cost savings.

Cargo booking regarding transit time

First of all, don't expect the goods to arrive faster than the whole box. As a reminder to exporters, when booking LCL shipments with a forwarder copy, the cargo will be stuffed into the container as the cargo is a Less Container (LCL), once the forwarder has received enough cargo to make the container 'full' instead Receipt. The place of receipt may be close to the port of loading or container freight station, far from the port of loading depending on where your factory is located, export cargo is booked.

Second, they may have one or more transshipment ports before the goods reach their final destination. There may also be a delay of one or more days at the transfer point. Before appointing a freight forwarder, you need to have a clear understanding of the arrival of the goods at the destination. Have your forwarder provide you with the closing date (container packing date), the planned vessel schedule, the vessel schedule at the transshipment port (if any) and the estimated time of arrival (ETA). Once the cargo booking is delivered to the forwarder, the arrival schedule is properly monitored according to the planning details given by them.

Get a quote before booking

If any shipping is involved, what is the cost of inland shipping? How much is the sea freight to the final destination port, etc.? As the cargo booking is for Less Container Load (LCL), the freight forwarder quotes a fee per cubic meter basis (CBM basis). Learn how the CBM is calculated if the weight is more.

Destination service fee

Get written information from your local freight forwarder about "the amount of the fee, what their counterparty at the destination charges your buyer." This is important because in the LCL world, different freight forwarders charge different "delivery note fees" to the consignee. Because, as the forwarder gets to know each other at the port of loading and the final destination, the price quoted at the port of loading may be lower, but the “freight” price at the final destination is higher. Here, once the excess is charged to the consignee at the port of discharge as a "Bill of Lading fee" and a certain "rebate" is refunded to the forwarder at the port of loading!

Booking type

Shipping incoterms are international standard codes used to determine when and where to transfer cargo bookings between suppliers and importers.

For example, FOB (Free on Board) only includes transportation from the factory to the port of destination (ie, Hong Kong). In addition, FOB also includes all export formalities that are necessary to ensure that the goods can be exported legally. However, from the port of destination, you must arrange for transshipment to the final destination.

You can also pre-order DAP (Delivered in Place), which includes shipping from a factory in China to a designated address overseas. For example your office or warehouse when the cargo is booked.

/ By tjchinafreight ivy / Shipping

From May 1st, China’s coal imports will be “zero tariff”?

From May 1st, China's coal imports will be "zero tariff"?
From May 1st, China's coal imports will be "zero tariff"?

In order to strengthen the guarantee of energy supply and promote high-quality development, the Customs Tariff Commission of the State Council has decided in accordance with procedures that from May 1, 2022 to March 31, 2023, a provisional import tax rate of zero will be imposed on coal.

According to the schedule of the announcement, the provisional import tax rate of zero will be implemented this time for imported coal that originally implemented the most-favored-nation tax rate of 3%, 5% or 6%.

According to Shanghai Securities News, at present, the largest source country of my country's coal imports is Indonesia. According to the Framework Agreement on Comprehensive Economic Cooperation between the People's Republic of China and the Association of Southeast Asian Nations and the Import and Export Tariff (2021), the currently applicable tax rate is 0.

The most-favored-nation tax rate applies to coal imported from Russia, Mongolia, and Canada from other import source countries, and the tax rate varies according to different coal types. After Australia cut coal exports to China last year, Russia became my country's second-biggest coal importer after Indonesia.

A number of industry insiders said that under the scenario of high international coal prices, the tariff policy will have a limited impact on the import coal market in the short term, and may have a certain impact on the long-term supply.

According to Guosheng Securities, the current FOB price of 4600 kcal thermal coal in Russia is about US$149.8/ton. If the tariff is reduced from 6% to zero, the CIF duty payment cost will be reduced from 1430 yuan/ton to about 1350 yuan/ton. The domestic quotation of 5000 kcal thermal coal is 950-980 yuan / ton, and the price of nearly 400 yuan / ton is still upside down.

China's seaborne coking coal mainly comes from Russia, the United States, and Canada. The current price of coking coal shipped to China plus freight is about US$515/ton. If the tariff is reduced from 3% to zero tariff, the duty-paid cost will be reduced from 3965 yuan/ton to 3855 yuan/ton .

The first-line quotation of coking coal in Jingtang Port in China is 3500-3600 yuan / ton, and the price of 250-350 yuan / ton is still upside down.

Data from the National Bureau of Statistics shows that last year, China produced 4.07 billion tons of raw coal and imported 323 million tons of coal, an increase of 6.6% year-on-year. The import volume exceeded 300 million tons for the second consecutive year. The coal import dependence was 7.3%, an increase of 0.05 percentage points year-on-year.

According to Qinhuangdao Coal Network, under the circumstance that coal imports are expected to decrease, the relevant ministries and commissions of the state have organized a mid- and long-term contract to supplement the emergency guarantee for imported coal. The amount of mid- and long-term contracts signed is 158 million tons, accounting for about 49% of the country's coal imports in 2021, and the vacancy of nearly half of the total imports has been guaranteed by the policy.

In order to ensure the stable supply of domestic coal and other energy sources, some provinces in southeastern and southern China have also relaxed customs clearance restrictions on imported coal, and the customs clearance procedures of the new process have been significantly simplified.

The previous Indonesian coal import policy requires that, except for Guangdong, other South China ports need to provide terminal purchase contract endorsement. Now Guangxi has fully liberalized the customs clearance of Indonesian coal imports, and Fujian has partially liberalized. This is conducive to the rapid entry of Indonesian coal, which is intended to encourage traders to import customs clearance.

According to data from the General Administration of Customs, coal imports in March 2022 were 16.423 million tons, a year-on-year decrease of 39.9%; in the first quarter, coal imports totaled 51.812 million tons, a year-on-year decrease of 24.2%.

Zhang Jianhong, a senior engineer at China International Engineering Consulting Co., Ltd., said that the current high price of overseas coal is the main reason for inhibiting the growth of imports. The implementation of a provisional import tax rate of zero for all coal this time will help reduce import costs and expand the import of coal resources. It is the coal import from Mongolia, Russia, Canada and other countries, which can better ensure the supply, guide the downstream coal industry to reduce coal consumption, and promote the transformation, upgrading and high-quality development of the coal industry. However, until the international energy prices fall, it is expected that coal imports will be difficult to increase significantly.

/ By tjchinafreight ivy / International

Time limit and necessary materials for foreign trade export tax rebate

01 When handling export tax rebates, pay attention to declaration procedures and time concepts

Export enterprises should pay special attention to the declaration procedures and the concept of time when handling export tax rebates to avoid losses.

When handling export tax rebates, you should pay attention to four time limits

30 days: After the foreign trade enterprise purchases import and export goods, it should promptly ask the supplier for a special VAT invoice or ordinary invoice, which is an anti-counterfeiting tax-controlled VAT invoice, and must go through the certification procedures within 30 days from the date of invoicing.

90 days: Foreign trade enterprises must go through the export tax rebate declaration procedures within 90 days from the date of export declaration of the goods, and production enterprises must go through the tax exemption and credit declaration procedures within three months from the date of export declaration of the goods.

180 days: The export enterprise must provide the local competent tax refund department with the verification form of export foreign exchange receipts (except for forward foreign exchange receipts) within 180 days from the date of export declaration.

3 months: If the paper tax refund certificate for export goods of an exporter is lost or the contents are incorrectly filled in, and it can be reissued or changed according to relevant regulations, the exporter may apply to the tax refund department for an extension of the declaration of tax refund (exemption) for export goods within the declaration period. , After approval, the application can be extended for 3 months.

02 Tax classification of export goods tax refund (exemption)

According to the current tax system, my country's export tax refund (exemption) tax is the value-added tax and consumption tax within the scope of turnover tax (also known as indirect tax);

The tax refund (exemption) for export goods is the value-added tax and consumption tax that have been paid in all aspects of domestic production and circulation of export goods.

Turnover tax generally refers to the so-called tax on items characterized by commodities. As far as my country's current tax system is concerned, turnover tax includes value-added tax, business tax, consumption tax, land value-added tax, customs duties and some local industrial and commercial taxes.

03Export tax rebate attached materials

1 customs declaration
The customs declaration form is a document filled in by the import and export enterprise to go through the declaration procedures to the customs when the goods are imported or exported, so that the customs can check and release the goods based on this.

2 Export sales invoice
This is the document filled out by the export enterprise according to the sales contract signed with the export buyer. It is the main document for foreign purchases, and it is also the basis for the accounting department of the export enterprise to record the sales revenue of export products.

3 Purchase Invoice
The main purpose of providing purchase invoices is to determine the supplier, product name, measurement unit, and quantity of export products, whether it is the sales price of the manufacturer, so as to divide and calculate the purchase cost.

4 Foreign exchange settlement bill or foreign exchange receipt notice

5 Waybill and Export Insurance Policy
It belongs to the direct export or entrusted export of self-made products by the manufacturer. If the settlement is based on the CIF price, the export cargo waybill and export insurance policy should also be attached.

6Contract Information
Enterprises that have the business of processing re-exported products with imported materials shall also submit the contract number, date, name and quantity of imported materials and parts, name of re-exported products, cost of imported materials and various taxes paid to the tax authorities. amount, etc.

7 Product tax certificate

8 Certificate that the export receipts have been written off

9 Other materials related to export tax rebates

04Goods tax refund method

At present, the tax refund methods for foreign-invested enterprises export goods include "first levy and then refund" and "exemption, credit, and refund" tax.

2 "First come and go back"

It refers to the goods exported by the production enterprise by itself or through the agency, which shall first be taxed according to the tax rate stipulated in the interim regulations on value-added tax, and then the tax authority in charge of the export tax rebate business shall comply with the stipulated tax rebate rate within the national export tax rebate plan. Approve tax refund.

2 Tax basis

The tax refund amount shall be calculated by multiplying the FOB value of the export goods in the current period by the exchange rate in RMB.

"FOB" (written as FOB price in English) is the FOB price at the port of shipment, but this FOB price is a symbolic price, that is, the seller will hand over the necessary shipping documents to the buyer to collect the payment according to the contract, and the risks of the buyer and the seller are divided. All are limited by the loading of goods on the ship. Therefore, the FOB price is the responsibility of the buyer to charter the ship and book the space, and apply for insurance to pay the transportation insurance fee.

The most commonly used conversion methods for FOB, CFR and CIF prices are as follows:

FOB price = CFR price - freight = CIF price × (1 - insurance premium × insurance rate) - freight

Therefore, if the enterprise trades at the CIF price as the foreign export, after the goods leave the country, the foreign freight, insurance premiums, commissions and financial expenses incurred by the enterprise should be deducted; if the transaction is made at the CFR price, the freight should be deducted.

3 Calculation formula

Tax payable for the current period = output tax of goods sold in the current period + FOB price of exported goods in the current period × exchange rate in RMB × tax rate - all input tax in the current period

Current tax refund amount = FOB price of exported goods × foreign exchange RMB price × tax refund rate

Relevant explanation of the above calculation formula

①The input tax for the current period includes all the domestic purchased materials, water and electricity charges, transportation expenses that can be deducted, and the current value-added tax levied by the customs for the current period. The input tax can be deducted.
②The exchange rate of RMB shall be determined according to the two methods stipulated in the financial system, namely, the price of the day announced by the state or the average price of the price at the beginning and end of the month. Once the calculation method is determined, the enterprise cannot change it within a tax year.
③ If the actual sales revenue of the enterprise is inconsistent with the amount recorded in the foreign exchange verification form submitted by the export goods, the tax authority will levy the tax based on the larger amount and refund the tax based on the amount recorded on the export goods declaration form.
④ If the amount of tax payable is less than zero, it will be carried forward to the next period to offset the amount of tax payable.

/ By tjchinafreight ivy / Shipping

FOB Shipping Point vs. FOB Destination

Container ship in the harbor in Asia 

International business terms (incoterms) were designed by the International Chamber of Commerce (ICC) to simplify international trade by creating a common standard language, a globally recognized list of terms related to the international transport and transport of goods.
Importers and exporters need to be proficient and proficient in many terms. Some terms are more common than others, such as Free On Board (FOB), Free Carrier (FCA) and Ex Works (EXW). FOB, while common, is largely misunderstood.
Although their language is largely drafted in legal language, it is the responsibility of all parties involved in a shipment to ensure that they understand all Incoterms, otherwise a simple shipment can turn into a costly accident .

Incoterms are important for several reasons. If you find yourself wondering what FOB means in shipping, be sure to take the time to understand FOB shipping

Free shipping on board

The FOB point of dispatch, also known as the FOB origin, is when title and responsibility for the goods pass from the seller to the buyer when the goods are placed on the delivery vehicle.
Since the FOB shipping point transfers title to the shipment of the goods when they are placed at the shipping point, legal title to those goods passes to the buyer. Therefore, the seller is not responsible for the goods during delivery. FOB Shipping Point is a further limitation or condition of FOB as liability changes hands at the seller's shipping terminal.

For example, suppose that ABC Company in the United States purchases electronic equipment from its supplier in China, and the company has a FOB point-of-ship agreement. If the nominated carrier damages the package during delivery, ABC Company will be solely responsible and cannot claim compensation from the supplier for the loss or damage. Suppliers are solely responsible for bringing electronic equipment to the carrier.

Free destinations on board

Conversely, for FOB destinations, title transfers at the buyer's loading dock, PO box, or office building. Title to the goods passes from the seller to the buyer once the goods have been delivered to the place designated by the buyer. Therefore, the seller legally owns the goods and is responsible for the goods in transit.

Types of free destinations on board

  • FOB freight prepaid and allows the named seller to be obligated to pay the freight and have the goods in transit. The seller bears the risk of loss of or damage to the goods in transit. Title to the goods passes to the buyer at the buyer's place of business.
  • FOB shipping prepaid and adding the specified seller is obligated to pay shipping. However, the seller charges the buyer for shipping. The seller bears the risk of loss of or damage to the goods in transit because the seller owns the goods in transit. Title to the goods transfers to the buyer's place of business.
  • FOB freight collect specifies that the buyer must pay the freight upon receipt of the goods. However, the seller bears the risks associated with shipping the goods because the seller still owns the goods during the shipping process.
  • FOB freight collect specifies that the buyer must pay the freight. However, the buyer deducts the fee from the seller's invoice. The seller is responsible for the goods because the seller still owns the goods during shipping.

Main difference

Another key difference between the two terms is how they are calculated. Since the buyer is liable after the goods are shipped, the company can record an increase in its inventory at this time. Likewise, the seller records the sale at the same time. If the goods are damaged or lost in transit, the buyer can file a claim as the company holds title during delivery.

The accounting rules for FOB destinations have changed. In this case, the seller completes the sale on its records once the goods arrive at the receiving dock. That's when the buyer records the increase in their inventory.

There are also differences in the division of costs. For the FOB shipping point option, the seller bears the shipping costs and charges until the goods arrive at the port of origin.

Once the goods are loaded on the ship, the buyer is responsible for all costs associated with shipping, as well as customs, taxes and other charges. For FOB destinations, the seller bears all costs and expenses until the goods arrive at the destination. Once in port, all costs - including duties, taxes and other charges - are borne by the buyer.