Managing FOB process (Free On Board) in the plastic industry

Here's a detailed but simple explanation of managing FOB (Free On Board) in the plastic industry:

FOB Basics:

Definition:

• Seller pays the costs to load goods 
• Buyer pays the shipping and other costs
• Risk transfers at ship's rail
• Price includes the loading
• Export clearance is included in the price

Ship's Rail: The ship's rail is the physical line on a ship where the horizontal deck (the floor/walking surface) meets the vertical side wall of the ship (Like where the floor meets the wall in a room, but on a ship). In international trade, it's an important reference point that traditionally marks where responsibility and costs transfer from seller to buyer during loading/unloading operations (especially in FOB - Free On Board terms).

Key Responsibilities:

Seller's Duties:

• Deliver goods to named port
• Clear goods for export
• Load goods on vessel
• Provide proof of delivery of the goods
• Quality verification of the goods

Buyer's Duties:

• Books and arrages the transportation vessel's space
• Pays the ocean freight
• Handles the import duties and costs
• Arrange the insurance for the shipping

Practical Management:

Documentation:

• Commercial invoice
• Packing list for the shipped goods
• Bill of lading of the goods
• Export declaration
• Certificate of origin of the goods

Packing List: A shipping document that expplains exactly what items are in a shipment, including quantities and packaging details. It serves as an inventory checklist for both shipper and receiver.

Bill of Lading (BOL): A legal document that serves as a receipt of goods shipped and as a contract for their transportation. It shows the goods being shipped, their destination and owner

Export Declaration: An official document submitted to customs authorities that provides details about the goods being exported, their value, destination, and codes. It's required for legal clearance of goods before leaving a country.

Certificate of Origin: A document that certifies where the products were manufactured or produced. It's used in international trade to verify the origin of goods, which affects tariffs and trade agreements.

Quality Control:

• Pre-shipment inspection of goods
• Loading supervision
• Weight verification if goods
• Container condition inspection
• Packaging checking

Timing Management:

• Making a production schedule 
• Port delivery timing
• Managing vessel schedules
• Loading windows
• Preparing the needed documents

Cost Considerations:

Seller Costs:

• Inland transport costs
• Export clearance costs
• Loading charges
• Documentation costs
• Terminal handling costs

Buyer Costs:

• Ocean freight
• Import duties
• Insurance charges
• Destination charges
• Inland delivery costs

Example Scenario: 

Plastic Pellet Order from Asia to USA Details:

• Order:           20 tons HDPE pellets
• Price:             $1,200 per ton FOB Shanghai
• Total Order: $24,000

Seller (Asian Supplier) Pays For:

• Factory to port transport
• Export customs clearance
• Loading onto the ship
• Port handling charges
• Documentation costs
• Container stuffing/padding to protect goods from damage

Buyer (US Buyer) Pays For:

• Ocean freight ($3,500)
• Insurance ($240)
• US customs duties
• US port charges
• Inland transport in US
• Import clearance fees

A Brief summary of the steps followed:

• Supplier loads pellets in Shanghai
• Ownership transfers at ship's rail
• Buyer arranges the shipping to Los Angeles
• Buyer handles the US customs/transport charges and procedures

Estimated of the total cost breakdown:

• FOB price:                   $24,000
• Shipping:                     $3,500
• Insurance:                   $240
• US duties/fees:           ~$1,200
• Inland transport:        $800 
• Final delivered cost:  ~$29,740