A question of FOB and container detention

Image for opinionA question of FOB and container detention

Amir, one of the readers of this blog asked this question..

Buyer booked his cargo with a container shipping company and took containers from them with 10 days of free time. The seller stuffed the cargo inside containers in 12 days, now there is a detention for 2 days for containers.

Term of contract is FOB, but seller did not mention in the contract that he will stuff the cargo inside container in less than 10 days.

Who should pay the detention of containers ?

What is your opinion/answer on this question..??

 

What did you think of the above article..?? Comment below..

14 comments on “A question of FOB and container detention

  1. There is no link between the term of the contract and the detention fee, the detention fee should be paid by party responsible of container detention, usually is paid by shipper as he is in charge of container stuffing.

  2. I suppose shpper need to pay for detention period not free.

  3. Dawn says:

    The Seller. The cost was incurred before loading the container on a vessel.

  4. Kingson Lee says:

    of course shipper shall pay the detention charges before they get the Bills of Lading. Shipping line will ensure they get paid before releasing B/L,

  5. sudhakar says:

    buyer has to pay

  6. Buyer has to take these costs though risen through the Seller as the Buyer is the contractor of the shipping line, whereas the Seller is the contractor of the Buyer

  7. To start with, FOB is not a correct Incoterms rule for use with containerized cargo. FCA is recommended in its place. However, should FOB Incoterms rules be used, all costs incurred prior to loading on board the vessel will be for the account of the Seller as it is the duty of the Seller to pay all charges up to and including the loading on board of the cargo even though the vessel is nominated by the Buyer. The Seller should pay the export clearance and loading on board the nominated carrier.

  8. Rahul S. says:

    I have the following observations:

    1. Before getting into such situations, it is highly unlikely (in bold and underline) that the shipper and buyer will not have this specified in their agreement contract about the responsibility of expense sharing.

    2. In the contract, good companies always specify the areas which is in their control and which isn’t. In such cases, if our company was the buyer and if the contract had been FOB/Ex-Works, then we would have mentioned something like:

    a. Once the order/s-line is booked, the Seller must ensure that they complete all export formalities (i.e. cargo readiness, stuffing, documentation etc.) within “x” days prior to the deadline as set by the shipping lines and port authorities. This is to ensure that the buyer has sufficient time to deliver the container/cargo over to the authorities without being penalized.

    b. The buyer will not bear any charges incurred such as detention or demurrage, if the seller fails to follow the deadline prescribed by the Shipping Line / Port authorities, as the responsibility of completing all export formalities on time lies completely with the seller and not buyer. In such cases, the seller will have to bear the expenses incurred.

    Response pertaining to the case being discussed:

    1. Assuming there is no formal agreement between the buyer and the seller about the charges – Ideally and morally, the seller needs to bear the expenses, as they haven’t given the buyer a realistic chances of delivering the containers/cargo in time. There is no way the buyer could have made it without being penalized.

    2. Due to lack of a contract, the buyer needs to prove that their truck/trailer was waiting outside the factory premises of the seller to collect the containers but had to wait for “x” no. of days to receive it. This would show that the buyer had intimated to the seller about the deadline imposed by the shipping line, which needed to be met. Since, the seller was unable to do his bit, the buyer shall and will not bear those expenses.

    1. Rahul S. says:

      Thirdly, since this is an FOB order, the seller should ensure that the containers are loaded on board and so the responsibility of buyer comes in after that.

      Anyway, some companies interchange FOB and Ex-factory (including mine :D) as per their own convenience. So I have given an explanation taking into consideration that all the responsibility lied with the buyer.

  9. Kishan Barai says:

    Actually its the seller, who have to pay detention charges because if you consider FOB rules than its says ” the seller responsibility to load cargo container on vessel board “

  10. vignesh says:

    Seller responsible for two days cost of container , Because the incoterm was FOB(Free On Board) so seller must be loaded the goods on board ship otherwise buyer takes the risks.

  11. It is simple. The ICC Incoterms 2010 rules clearly state FOB is not suitable for container shipment, and situations like this are EXACTLY why. I suggest everyone out there in la la land purchase and read the full Incoterms 2010 book – not just the little blubs you read on the Internet, because that is misleading is is less than half the story. You can purchase the book either in paper or electronic vesion at: http://www.iccwbo.org/products-and-services/trade-facilitation/incoterms-2010/

    I will quote directly from Incoterms 2010 FOB and you can make your own decision as to why any seller who sells on FOB terms for international sales is a fool, as in the case of the example give above where under the Incoterms 2010 rules, demurrage is clearly on the seller – read it and weep (Note that his is not the FULL Incoterms rule – for that you will need to spring for the US$60 and purchase the book for yourself:

    FOB

    FREE ON BOARD

    FOB (insert named port of shipment) Incoterms® 2010

    GUIDANCE NOTE

    This rule is to be used only for sea or inland waterway transport.

    “Free on Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

    The seller is required either to deliver the goods on board the vessel or to procure goods already so delivered for shipment. The reference to “procure” here caters for multiple sales down a chain (‘string sales’), particularly common in the commodity trades.

    FOB may not be appropriate where goods are handed over to the carrier before they are on board the vessel, for example goods in containers, which are typically delivered at a terminal. In such situations, the FCA rule should be used.

    FOB requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

  12. Tinx says:

    This is the responsibility of the seller. He is responsible for the packing of the container and for returning it on time. If he was unable to stuff within the allotted free time it is his responsibility to settle any and all detention.

    The buys responsibility does not begin until it is loaded on board the vessel.

    1. hassan says:

      i think the buyer is responsible for paying any expense because who making booking with shipping line then buyer should collect this expense from seller because his mistake .

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