FOB terms are like a beautiful poster that gives exporters sweet dreams, but they may wake up to find money gone, goods gone too. This article thoroughly analyzes the pitfalls exporters may encounter under FOB terms and how to mitigate risks, helping you sleep soundly in international trade.

Advantages:
1) Simple Operation: Exporters do not need to deeply understand the complexities of chartering and cargo insurance. They only need to deliver the goods to the ship designated by the buyer and complete the process.Export ClearanceProcedures be handled.
2) Avoid Freight Fluctuations: Under FOB terms, freight is the responsibility of the importer, so exporters do not have to worry about profit losses caused by freight instability.
3) Mitigate Shipping Risks: FOB terms require exporters to deliver goods to the ships rail, after which shipping risks are transferred to the importer.

Disadvantages:
Hidden Risks: Although FOB terms offer many conveniences to exporters, they also conceal significant risks, particularly those related to payment collection.

Buyers Breach Before Shipment:
? Intentional Fraud: After signing the contract, the buyer may deliberately fail to fulfill the obligation of chartering and booking, rendering the exporters preparation futile.
? Market Fluctuations: If the market price of the goods drops, the buyer may choose not to send a ship to collect the goods and refuse payment.

Buyers Non-Payment or Bankruptcy During Transit:
? Malicious Non-Payment: Even after the goods are shipped, the buyer may find excuses to refuse payment.
? Buyers Bankruptcy: If the buyers company goes bankrupt during transit, the exporter faces the risk of unrecoverable payment.

Unauthorized Release of Goods Upon Arrival:
? Collusion Between Buyer and Freight Agent: The buyer may collude with the freight agent to obtain the goods through improper means.
? ResultExporters face a lose both money and goods situation.

Change Trade Terms:
Where applicable, try to adopt CIF terms, as this allows the exporter to control the transportation and shipment by appointing their own freight forwarder.

Setting Deposit Ratio:
Do not easily reduce the deposit ratio. A reasonable deposit ratio can to some extent reduce the possibility of buyer default.

Designated freight forwarder and shipper:
If you still choose FOB terms, you can stipulate in the contract that the shipper (export company) will entrust its own freight forwarder to book the ship.

Purchase export credit insurance:
Consider purchasing export credit insurance, such as Sinosure, to reduce losses caused by risks such as buyer default or refusal to pay.

Credit investigation and review of freight forwarder qualifications:
Before signing the contract, conduct credit investigations on buyers and freight forwarders to avoid transactions with unscrupulous merchants.

Under FOB terms, exporters need sufficient risk awareness and effective countermeasures to avoid the awkward situation of losing both money and goods. Only by comprehensively applying various strategies and tools can exporters truly minimize risks and advance steadily on the global trade stage.