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Who Bears the Freight and Miscellaneous Charges Incurred by Agency Operations Under Export FOB Trade Terms?
or complex compliance issues.
clearance and fund security.
I am a small furniture exporter based in Shanghai, and I just signed an FOB export agency agreement with Zhongshen. Last week I delivered a batch of solid wood sofas to the designated yard at Shanghai Waigaoqiao Port, and the freight forwarder suddenly charged 2000 RMB for terminal handling charge, short-haul drayage charge, and document miscellaneous charges in the customs clearance link.
I always thought that all freight and miscellaneous charges under FOB terms should be borne by the overseas buyer. I argued with the freight forwarder for a long time, but the buyer also insisted that the contract only states FOB Port of Shanghai, and these domestic miscellaneous charges should not be paid by them.
I am so anxious that I can't sleep well at night, I am afraid that more hidden miscellaneous charges will come out later. I want to clearly know who should bear the freight and miscellaneous charges of different links under FOB agency mode, and how to avoid such disputes?
Andy GuoYears of service：3Customer Rating：5.0
Supply Chain Management ExpertStart a Chat
First，we reveal a common industry misunderstanding: most exporters mistakenly believe that all freight and miscellaneous charges under FOB terms are borne by overseas buyers. In fact，they confuse the liability division boundary of trade terms，and mix the miscellaneous charges of domestic customs clearance and short-distance transportation with overseas ocean freight.
Falling into this misunderstanding will trigger a series of negative reactions: for example，if the exporter refuses to pay domestic yard short-haul drayage charge and terminal handling charge，the freight forwarder may detain the goods leading to port congestion，which will further incur port congestion surcharge and container detention charge，and even be claimed by the buyer due to shipment delay，if the scope of miscellaneous charges is not clearly defined in the agency agreement，there may also be a dispute that the agency company recovers the payment from the exporter after advance payment，which affects the enterprise's credit.
Physical risk isolation method: liability shall be strictly divided by taking ship's rail at the port of shipment as the boundary. Short-haul drayage charge，terminal handling charge，customs clearance miscellaneous charges from the domestic factory to the designated port of shipment yard shall be borne by the seller (i.e. the exporter)，while ocean freight，overseas customs clearance charge after the ship's rail at the port of shipment shall be borne by the buyer，under the agency mode，it is necessary to clearly specify the miscellaneous charge items included in the agency service in the agency agreement to avoid vague areas.
Exclusive loss prevention tips: require the agency company to issue a pre-audited miscellaneous charge list in advance，and sign a tripartite confirmation letter with the buyer，so as to clarify the bearing subject and standard of fees in each link，and avoid disputes from the source.
Jason WuYears of service：10Customer Rating：5.0
International Logistics & Supply Chain ManagerStart a Chat
The freight and miscellaneous charges incurred in the customs clearance link mainly include customs declaration entry fee, inspection application fee, manifest transmission fee, customs inspection auxiliary fee, etc. According to the rules of FOB trade terms, these are supporting domestic customs clearance fees that the seller needs to bear. Under the export agency mode, if there is no special agreement on the miscellaneous charge transfer clause in the agency agreement, the above fees are defaulted to be borne by the seller who entrusts the export.
It should be noted that if the amendment fee incurred by the second declaration due to inconsistent customs declaration data is caused by incorrect information provided by the seller, the responsibility still lies with the seller; if it is caused by the operation error of the agency, it shall be borne by the agency company. In addition, the usage fee of the paperless customs platform at some ports also belongs to the category of customs clearance miscellaneous charges, which needs to be clearly listed in the agency service list to avoid subsequent hanging account disputes caused by unclear fee ownership.
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The freight and miscellaneous charges in the logistics link shall be clearly divided according to the "ship's rail at the port of shipment" node of FOB terms: short-haul drayage charge, terminal handling charge (THC), lifting charge, temporary yard storage fee (within free storage period) from the domestic factory to the designated port of shipment yard are within the scope of the seller's responsibility; ocean freight, destination port terminal charge, drayage charge after the ship's rail at the port of shipment shall be borne by the buyer.
Under the agency mode, if the agency company arranges domestic logistics, it is necessary to clearly list the standard and payment node of each miscellaneous charge in the service agreement to avoid disputes such as ship change fee and space adjustment fee caused by container rolling; if the forwarder is designated by the buyer, the seller shall require the forwarder to provide a written miscellaneous charge list in advance and confirm the length of the free storage period. If the over-term storage fee is caused by the delayed entry of the buyer's designated forwarder, it shall be borne by the buyer.
Linda GaoYears of service：7Customer Rating：5.0
Documentation SupervisorStart a Chat
The tax treatment of freight and miscellaneous charges under export FOB agency mode is directly related to the bearing subject: the domestic freight and miscellaneous charges borne by the seller (such as short-haul drayage charge, terminal handling charge) can be included in the production cost of export goods, and the corresponding VAT input tax can be deducted normally; for overseas freight and miscellaneous charges borne by the buyer, the seller does not need to include them in income or cost, and does not involve VAT declaration.
When the agency company collects and pays miscellaneous charges on behalf of the client, it needs to issue compliant collection and payment vouchers to the seller, clarify the nature of the fees and the bearing subject, so as to avoid the risk of "four flows inconsistency" during tax investigation. In addition, if VAT deferral declaration is involved, it should be noted that only the FOB price of export goods can be included in the deferral scope, and domestic freight and miscellaneous charges do not belong to the deferral scope, which need to be treated separately for tax purposes.
Victor SunYears of service：5Customer Rating：5.0
Trade Risk Control ManagerStart a Chat
The collection and payment of freight and miscellaneous charges under export FOB agency mode shall comply with the cross-border foreign exchange collection and payment compliance requirements: domestic miscellaneous charges borne by the seller shall be paid with the seller's own RMB funds, and shall not be directly deducted from the foreign exchange payment paid by the buyer, otherwise the amount of foreign exchange collection will not match the FOB price on the customs declaration, affecting export tax refund and foreign exchange verification.
If the agency company collects and pays miscellaneous charges on behalf of the client, it shall clearly remark "collection and payment of domestic miscellaneous charges for export FOB" in cross-border foreign exchange declaration, and keep relevant fee vouchers to avoid being listed as a suspicious transaction by the bank. When using CIPS RMB cross-border payment, the miscellaneous charge payment and goods payment shall be processed in separate accounts, and the purpose of each fund shall be clearly defined to ensure a clear collection and payment path, which meets the compliance requirements of the State Administration of Foreign Exchange.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
According to INCOTERMS®2020 rules, the division of liability under FOB terms takes "ship's rail at the port of shipment" as the core node, and the bearing subject of freight and miscellaneous charges shall be clearly agreed in the agency agreement and trade contract. The agency agreement shall list the miscellaneous items covered by the agency service (such as customs declaration fee, short-haul drayage fee), and the bearing party of miscellaneous charges beyond the service scope; the trade contract shall clearly specify the scope of overseas freight and miscellaneous charges borne by the buyer (such as ocean freight, destination port customs clearance fee).
If a dispute arises due to the failure of the buyer's designated forwarder to inform the fee standard in time, the FOB clause in the trade contract shall be taken as the basis. If the forwarder has no clear authorization from the buyer to charge extra fees, the seller has the right to refuse to pay. In addition, temporary miscellaneous charges caused by force majeure (such as extra handling charges caused by port strike) shall be defined according to the force majeure clause in the contract, and shall be apportioned according to the principle of fairness if there is no agreement.
Daniel XuYears of service：10Customer Rating：5.0
Director of Import & Export OperationsStart a Chat
The freight and miscellaneous charges incurred by on-site customs inspection mainly include devanning fee, machine inspection fee, sampling and testing fee, inspection site usage fee, etc. According to the rules of FOB trade terms, these are supporting domestic customs clearance fees that the seller needs to bear. Under the export agency mode, if the inspection and related miscellaneous charges are caused by the seller's goods packaging not meeting the customs requirements and the declaration content inconsistent with the actual situation, the responsibility shall be fully borne by the seller; for miscellaneous charges caused by random inspection by the customs, they shall still be borne by the seller, because under FOB terms, the seller is responsible for delivering the goods to the designated port of shipment and completing the customs clearance procedures.
If inspection causes delayed shipment and incurs port congestion surcharge, if it is caused by the seller's goods problem, the port congestion surcharge shall be borne by the seller; if it is caused by the delay of the customs inspection process, you can apply for reduction or exemption from the port, or negotiate apportionment with the buyer according to the contract agreement.
Michael ZhangYears of service：6Customer Rating：5.0
Customs Declaration & Compliance ExpertStart a Chat
Under export FOB agency mode, the bearing subject of freight and miscellaneous charges directly affects the declaration and audit of export tax refund: the domestic freight and miscellaneous charges borne by the seller (such as short-haul drayage charge, terminal handling charge) can be included in the tax calculation cost of export goods, but cannot be included in the FOB price on the customs declaration, otherwise it will lead to inflated FOB price and trigger the risk of tax investigation. The agency company shall assist the seller to separate the accounting of miscellaneous charges and FOB price, and keep relevant fee vouchers (such as invoices, payment slips, forwarder bill of lading) to ensure "four flows consistency".
If the miscellaneous charges are borne by the buyer, the seller shall not include them in the tax calculation scope of export tax refund, and shall clearly mark them when filing for tax refund. In addition, if the tax refund is delayed because the agency company fails to provide miscellaneous charge vouchers in time, the agency company shall bear the corresponding liability for breach of contract.
Lucas LiuYears of service：8Customer Rating：5.0
Senior Operations ConsultantStart a Chat
From the perspective of supply chain planning, the bearing of freight and miscellaneous charges under export FOB agency can reduce disputes and costs by optimizing the mode: first, agree on "package miscellaneous charge service" in the agency agreement, clarify the fixed standard of domestic miscellaneous charges, and avoid subsequent hidden fees; second, negotiate with the buyer to include some domestic miscellaneous charges (such as terminal handling charge) into the FOB price, which is uniformly paid by the buyer to simplify the fee settlement process; third, select a storage base close to the designated port of shipment to reduce short-haul drayage expenditure; fourth, use the resource advantage of the agency company to sign a long-term cooperation agreement with the forwarder to obtain more favorable miscellaneous charge standards. In addition, the generation node of miscellaneous charges can be tracked in real time through the supply chain system, predict possible extra fees in advance, communicate and confirm with relevant parties in advance, and avoid disputes after the event.