I'll add another little gem to the discussion of FOB usage. Did you know
that FOB is not a proper term for shipment by truck (regardless of its
almost universal usage)? It is suitable for "sea and inland waterway
transport" at least as far as the International Chamber of Commerce is
concerned. The Uniform Commercial Code (UCC) says the same regarding
shipments within the US.
In my 26 years of experience in Purchasing, systems and EDI I have seldom
seen a subject that is so widely and commonly used as Trade Terms (what we
actually mean when we say 'FOB') yet actually understood so little. I would
recommend getting with the most experienced person in your traffic
department as well as the person responsible for Purchasing Administration
in your company and/or your legal department and see if they agree on the
usage of Trade Terms for your company (don't be surprised if they don't
agree).
There are 13 basic trade terms (i.e., FOB, CIF, FAS, EXW, etc.). The three
basic issues that are addressed by the 13 basic terms are the transport of
the goods, the risks associated with the shipment and the costs associated
with the shipment. These terms (as you can see by the FOB segment data
elements) can be applied generally or very specifically. You can say "FOB
Origin" meaning wherever the shipment originates or you can specify a "named
place" as in "FOB Origin New York, NY". If you study the X12 codes you may
get a basic impression of what some of the issues are. To really understand
trade terms you are going to have to either talk to someone with real
traffic experience (such as living through lost or damaged shipments when
critical, long lead time equipment puts a major project at risk for a big
customer) or do some in depth research.
An excellent resource is http://www.iccwbo.org/index_incoterms.asp at the
International Chamber of Commerce website. You can view the "preamble" for
all 13 of the trade terms as well as view the Wall Chart. The small
(expensive) booklet ("Incoterms 2000") is probably the most widely used
reference by traffic professionals in the world and is the best resource I
have ever seen on this subject. The wall chart (also expensive) is an
excellent tool because it aligns the 13 terms in a "process" arrangement and
lets you visually see the differences between them. The web site will
gladly lead you to the ICC bookstore so you can order the pricey (albeit
very effective) products.
The Cornell Law School discusses FOB and other trade terms under the Uniform
Commercial Code (http://www.law.cornell.edu/ucc/2/2-319.html).
Allan Bennett
GE Aircraft Engines
Phone: (513) 243-1767
Fax : (513) 243-0234
email: [EMAIL PROTECTED]
-----Original Message-----
From: Michael Mattias [mailto:[EMAIL PROTECTED]]
Sent: Friday, June 01, 2001 8:02 AM
To: [EMAIL PROTECTED]
Subject: Re: Automotive/Heavy Truck FOB usage question(s)
It's not just the code values used in FOB01, it's the very meaning of "FOB"
and that of responsibility for freight charges which is often misunderstood.
"FOB" is an acronymn for "Free On Board." Technically, it means of "the
point at which title passes to the buyer."
The case in which this makes a difference is when a shipment is lost or
damaged in transit. If an item is sold "FOB shipping point" the consignee is
liable for the goods as soon as the shipper turns them over to the carrier -
i.e., the consignee must pay the shipper for the merchandise and settle any
loss or damage claims with the carrier . If the item is sold "FOB
Destination", the consignee is not oblgated to pay for the merchandise until
it is received (in good order).
These technicalities, of course, is often meaningless in The Real World, as
Real Customers simply do not pay until they receive their merchandise in
good order. (There *are* exceptions, but they are rare). The seller/shipper
ends
up totin' that barge to settle up with thecarrier. (Unless the seller wants
to
upset the buyer, which does not happen too often). As far as "prepaid" and
"Collect" freight, this, too has a technical meaning: who actually pays the
carrier. If prepaid, the shipper pays; if collect, the consignee pays.
BUT...
this does not mean who "ultimately" is paying the freight charge. The
shipper
may prepay the freight as a convenience to the buyer, but add the freight
charges to the invoice. When I worked for a PT distributor, we received some
shipments "freight collect" (we wrote the check to the carrier), but the
seller
gave us a *credit* on the invoice when the shipment was "freight allowed."
For creating ANSI/EDIFACT invoices or ASNs, the bottom line for code values
in the FOB or any other segment is, as always, "what is agreed between the
partners."
But in nearly twenty years of working with invoice and ASN documents for
dozens of companies, I've never seen anyone actually use those codes for
anything.
Michael C. Mattias
Tal Systems
Racine WI
[EMAIL PROTECTED]
> ----- Original Message -----
> From: "Linda Leckrone" <[EMAIL PROTECTED]>
> To: <[EMAIL PROTECTED]>
> Sent: Thursday, May 31, 2001 2:45 PM
> Subject: Automotive/Heavy Truck FOB usage question(s)
>
>
> > Hello EDI-L
> >
> > I have a question that I really should know, but I seem to be a bit
confused.
> > I'm working on some mapping and ran into some issues with the FOB
segment. Now,
> > generally this isn't a problem - the FOB01 is a two character code and
at the
> > header level... that's usually enough information. However, this time
the
> > questions came in - what is it FOR? What does it MEAN? And it occurs
to me
> > that I really don't know. So here's my situation:
> >
>> but is there any
> > kind of relationship between the terms of payment and the FOB01?
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