Resourcing Design

A trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship's rail. When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier.

Buyer is responsible for the main carriage/freight, cargo insurance and other costs and risks.
In the export quotation, indicate the port of origin (loading) after the acronym FOB.
In fact FOB means the buyer is responsible for the freight and other costs and risks.
This means that the buyer has to bear all costs and risks to loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export.

From the image its very clear who are involved in FOB:
1) Exporter.
2) Transport company.
3) Container Freight Station (CFS)
3) Customs clearance agents.
4) Customs.
5) Fumigation servicing company.
6) Plant quarantine Testing Authority.
7) Operators at the port terminal.

Product Price:
The exporter gives you the price that includes product price with packing. It is known as Ex-Factory price. Ex-Factory price = Product + Packing (At manufacturer facility)

Transport charges to CFS:
It is the amount exporter pays to move the goods from their warehouse to container freight station(CFS).

Container Freight station charges:
Consider it as a big warehouse, where customs inspection, testing, and container stuffing is done. As the cargo sitting here, CFS charges a fee for this. CFS charges = Fee + GST.

Customs clearance charges:
Customs officer will inspect your consignment and will issue Let Export Order, so your shipment can be exported. Clearing agents will arrange for this inspection and charges a service fee for this. Customs clearance charge = Service fee + GST.

Fumigation fee:
Fumigation is necessary to prevent the transfer of pests, termites, and other organisms to foreign territory. The fumigation service company does the fumigation and issues a certificate. The exporter must send this certificate to the importer along with other export-related documents. Charges = Fumigation fee + GST.

Plant Quarantine Testing charges:
Plant quarantine organization of India does PQ testing and issues a Phytosanitary certificate. A random sample is pulled out and sent to the lab for testing to ensure that the product is pest-free. Phytosanitary certificate charge = Testing fee.

Opening and Repacking charges:
While the consignment is sitting at the CFS, it is subjected to customs inspection and health testings. So, to inspect the packages will be randomly chosen and opened for inspection and to take a sample for testing. The opened boxes have to be packed and sealed again before stuffing into the container.

Terminal Handling Charges (THC):
As the name implies, it is the handling fees at the seaport. This charge includes moving the container within the port and putting the container on the ship using cranes.

BL Fee:
Bill of Lading fee is a documentation charge payable to the carrier at the time of releasing the Bill of Lading. These are some other charges applicable and depends on the need at the time of export.
1) Survey charges.
2) Lashing charges.
3) Legalization charges.
4) Halting charges.

The cargo insurance and delivery of goods to the named port of destination (discharge) at the seller's side. Buyer is responsible for the import customs clearance and other costs and risks. In the export quotation, indicate the port of destination (discharge) after the acronym CIF, for example CIF Dubai or CIF Los Angeles. The seller contracts for insurance and pays the insurance premium. The CIF term requires the seller to clear the goods for export.

Various components of the CIF price.
CIF prices = Cost of the Goods + Insurance + Sea Freight + Other charges(in any)

Cost of Goods:
This price component includes the cost of goods, inland transport, and other charges associated with on-boarding on to the vessel.

Insurance:
Insurance covers all the risks that arise during sea transit. The premium for this marine insurance is %0.05 of the CIF price. And in the event of a claim (if goods lost or damaged), you can get up to 90% of the total transaction value.
Normal practice is that shipment is insured for 110% of the total commercial value so that in case of any calamity 99% of the total cost is recoverable.

Freight Charges:
The freight charge is the cost involved in transporting the material from the origin port to the destination port. The shipping line charges freight on the volume basis.
Apart from sea freight, there are few other charges from shipping line but varies applicable only in certain situation.

Risks:
In case of CIF : The risk passes once the seller puts the cargo on to the vessel. Seller is also responsible for insuring the shipment and delivering it at the destination port.