From the factory, the seller can load the goods onto the means of transport provided by the buyer, but is not required to do so; The seller must provide the product only at a selected location, while the buyer pays for the transport. The seller is required, on the agreed date or within the agreed time, to make unloaded goods available to the buyer at the point of delivery specified in the contract. In the absence of such instruction in the contract, the seller is required to deliver the usual delivery of similar goods space and time. If the parties have not agreed on a specific point at this location and there are several points available, the seller can choose the point that is best for him at the place of delivery. As with everything, there is a negative aspect of importing goods on ex-factory shipping conditions. You may be responsible for any costs associated with errors in your supplier`s documentation. The process can also be easily extended, as your agent must determine the cost of overseas. It is also important for those who design delivery contracts involving incoterms to understand how specific goods are delivered physically (i.e. by what mode of transport, how they are packaged, etc.). It is common for the person processing the delivery contract (usually a “home” or “external” agent) to be not as familiar with the actual nature of the delivery as the “supply person” on site. Gaps in understanding this process can lead to contractual design issues.
For example, when goods are stored in containers, it is customary for containers to be delivered to the terminal by the vendor and not transported on board the ship, as this is the responsibility of the logistics officers. If a supplier has been responsible for FOB delivery, but there are provisions in the delivery contract that offer the supplier a delay exemption outside its proper control, a buyer cannot be protected from late delivery if the reason for the late delivery is the delay of delivery through logistics. Conversely, if the supplier has accepted the delivery of FOB but does not have, under the delivery contract, an exemption from non-loading containers by these intermediaries, the supplier may face contractual liability in the event of a delay, etc., regardless of whether it delivered the containers to the port at the right time. Hanjin Shipping`s financial problems in mid-2016 caused many sleepless nights for sellers who, in this regard, had contracted inappropriately under FOB`s terms. This is a warning story for sellers and buyers. Below are a number of issues that the parties should consider in developing their supply contracts and the inclusion of Incoterms. All of these issues can be dealt with fairly simply if the terms of a supply contract and its consistency with Incoterms “in advance” are properly taken into account. There are different approaches that organizations can follow, including: if coterms are properly integrated, incoterms can play a very useful role in delivery contracts by maximizing efficiency both in the design process and in the field, as they are generally understood and eliminate the need for global commitments. However, the purchase of critical equipment for projects is too regular with delivery contracts that do not correspond to the incoterms indicated there. Don`t worry, Shippo can make this process simple.