Offers and contracts must stipulate the point at
which the exporter will have fulfilled their commitment to deliver, that is, the
point at which risk and responsibility are transferred to the buyer.
Free on board (FOB):the goods will be loaded
at the sellers expense onto a vessel at the location stipulated in the contract,
e.g. FOB Santos. The seller's responsibilities and risk end when the goods cross
the ships rail, and from then on the buyer bears all charges and risk. (Under an
ECC (European Contract for Coffee) FOB contract the buyer is responsible for
insuring the goods from the last place of storage ahead of loading on board,
e.g. the port warehouse, but this is not the case under the GCA FOB contract.)
Most coffee contracts are FOB although the use of FCA contracts is on the
increase.
Free on truck (FOT)or free on rail (FOR): in landlocked countries
the sale is often FOT or FOR, with buyers themselves arranging transport to the
nearest ocean port and onward carriage by sea. International transporters,
usually linked with shipping lines, often offer one-stop services, taking the
goods in hand in Kampala, Uganda, and delivering them to Hamburg, Germany, for
instance, using a single document known as a combined bill of lading covering
both inland and maritime transportation*. The exporter provides the customs
clearance documentation.
Free carrier
(FCA):risk of loss is transferred when the coffee is delivered to the
freight carrier at the place of embarkation. All freight charges, including
loading onto an ocean vessel, railcar, trailer or truck (combined bill of
lading), are payable by the buyer. The exporter provides the customs clearance
documentation.
Cost and freight (C&For CFR): the seller is responsible for paying
costs and freight (but not insurance) to the agreed destination.
Cost, insurance, freight (CIF):the seller is
also responsible for taking out and paying the marine insurance up to the agreed
point of discharge. Very rarely if ever used nowadays.
In all cases it is the
sellers responsibility to deliver the shipping documents to the buyer. When a
parcel is loaded on board ship, a mate's receipt is issued to the ships
agent.
This is the legal basis for the bill of
lading (B/L), which should be prepared and issued immediately. Shippers are
entitled to the B/L as soon as the goods have been loaded. Some agents release
them only once the vessel has sailed, but this is incorrect and causes
unnecessary cost.
The
International Chamber of Commerce's Guide to
Incoterms (2000) contains a more detailed description of these and other
shipping terms. However, the standard contracts used in the coffee trade all
state or imply that under an FOB sale too the seller is responsible for booking
freight space, arranging shipment and producing a full set of shipping
documents. These stipulations in standard coffee
contracts differ from, and supersede, the Incoterms definition of FOB.
* Unless special
arrangements have been made with the carrier, such shipments must be re-stuffed
at the port of shipment if an LCL bill of lading is required.