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Under FOB, beware of 'people and wealth'

by:VIPUTRANS     2020-07-27
In June 2011, a furniture export company in Qingdao (hereinafter referred to as the seller) and a South Korean company (hereinafter referred to as the buyer) signed a trade contract, and the Qingdao company exported wooden furniture to the South Korean company using FOB.

After the seller prepares the goods, according to the buyer's instructions, the freight forwarder A will book and deliver the goods, and the forwarder A will deliver a full set of original bills of lading to the seller.

The developments seem to be orderly, as everyone knows, this is the eve of the storm...

Just after the seller got the bill of lading, according to the agreement, when asking the buyer for the payment with the copy of the bill of lading, it was found that the goods had arrived at the port of destination, but the consignee had not seen payment.

The seller thought: 'Although the bill of lading is still in its own hands, after all, the payment has not been received, and any return or resale to a third party will cause considerable losses.' So he continued to urge the buyer to pay.

It was not until later that the seller discovered that the goods had been taken away and the buyer would no longer pay!

'The bill of lading is still in my own hand, how could the goods be taken away?' The Qingdao seller was puzzled.

“Actually, it is not uncommon for domestic sellers to suffer damage to domestic sellers due to delivery of goods without B/L, but such tragedies will always occur in some companies.” Zhai Lei, a lawyer specializing in freight forwarding and foreign trade at Shandong Kangqiao (Qingdao) Law Firm, told C Weekly .

Problem: Leather bag company or overseas company releases goods without B/L
Zhai Lei pointed out that FOB means that the buyer designates the carrier (usually a foreign freight forwarder and its agent in China), and the buyer controls the transportation. Freight forwarders often obey the buyer, and even are directly controlled by the buyer. Delivery of goods without B/L usually occurs in this situation.

Under this type of trade, two sets of bills of lading are usually produced: shipowner's bill and freight forwarder's bill. The freight forwarder uses himself (or his agent) to book the space for the shipper from the shipping company and obtain the owner's bill. What domestic exporters get is the HOUSE BILL OF LADING issued by the freight forwarder (that is, the freight forwarder, or even the bill of lading). The shipper and consignee usually show the seller and the buyer.

'After the freight forwarder obtains the shipowner's bill from the shipping company, it can directly send it (or telex to) the foreign agent, and the foreign freight forwarder can pick up the cargo from the shipping company after receiving the shipowner's bill (or telex notice). As for whether the foreign freight forwarder has to take back the freight forwarding order when it delivers the goods to the actual consignee, this is another matter. Once the foreign freight forwarder delivers the goods to the consignee, if it does not require the consignee to return the original bill of lading, then the shipment In a sense, the bill of lading in your hand can be regarded as waste paper.' He said.

Zhai Lei told C Weekly that at present, companies that dare to deliver goods without B/L are usually leather bag companies or far overseas. Once something goes wrong, it is not easy to want them to take responsibility.

Solution: find the carrier to hold relevant responsibilities
'The consequence of the goods being released without a bill of lading, for the shipper, is that although the original bill of lading is in hand, the buyer cannot be required to pay on this condition. After all, the goods have been taken away by the other party. For the buyer , I don't pay, what can your seller do for me?' Zhai Lei said.

At this point, all the seller can do is continue to hold the carrier accountable.

Zhai Lei said that foreign traders know that the bill of lading has three major functions, namely, the property certificate, the goods receipt and the proof of the contract of transportation. Whoever owns the bill of lading is the right holder. If the carrier releases the goods without taking back the original bill of lading, resulting in loss of the seller’s payment, it shall be liable for compensation.

The Qingdao company in the case finally chose to protect its rights and interests through legal channels, and the court also ruled that the carrier company B should be liable for compensation in accordance with the law.

'However, we have to consider: Does the carrier have sufficient compensation capacity? If the carrier has sufficient compensation capacity, will he still release the goods without bill of lading?' Zhai Lei said.

Prevention: Try to avoid FOB payment methods
At present, most domestic export enterprises adopt FOB trade method in their export business. In this method, the freight forwarder or shipping company is designated by the buyer, and the freight forwarder or shipping company is responsible to the principal (consignor). There are often freight forwarders or shipping companies. The shipping company released the goods to the consignee without taking back the original bill of lading. What's more, the freight forwarder and the consignee colluded with the consignee to release the goods maliciously, causing the seller to lose money and even go bankrupt.

Here, Zhai Lei gives some suggestions to export companies:

First, when exporting, if possible, do FOB as little as possible. After all, delivery without B/L usually occurs in FOB mode;

Second, if you have to do FOB, then in the trade contract, the buyer and the seller agree on the freight forwarding company (not necessarily limited to one, at least within the scope of the following point 3), if the buyer has to be paranoid in his own opinion , Then the seller must consider the risk;

The third is to pay attention to the bill of lading and its issuer. If the carrier and the bill of lading have not been filed with the Ministry of Communications of China, you have to be careful. The filing of the bill of lading and the carrier requires a deposit, which makes the bill of lading relatively safe.

Fourth, choose a freight forwarding company with good strength and reputation;

Fifth, the freight forwarder is required to deliver the bill of lading to itself;

Sixth, SHIPPER is as far as possible its own company or a company that it can control;

Seventh, the consignee tries to TO ORDER as much as possible.

There are many possibilities for delivery of goods without a bill of lading. When exporting, companies must remember to understand the customs policies of the exporting country and the buyer’s credit and other information. Don’t wait for the tragedy to happen.
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