Five Fatal Traps in FOB Entrepot Trade

Mr. Zhang recently encountered a strange thing: A batch of goods shipped to Southeast Asia through entrepot trade, which was agreed to be on FOB terms, ended up paying more than 10,000 yuan in freight. Behind this, it is exactly the blind spot of FOB entrepot trade that many foreign trade people are prone to step into - what you think is "free on board" may hide unexpected costs and risks.

Different from traditional direct trade, the FOB terms in entrepot trade involve three roles:

• The original seller (in country A) sells the goods to the middleman on FOB terms
• The middleman transships in country B and sells to the end buyer on CIF or FOB terms
• The end buyer (in country C) finally receives the goods

Trap 1: Hidden Secondary Transportation Costs
When the middleman requires transporting the goods from country A to the transshipment port in country B, if it is not clearly agreed in the contract, the seller in country A may need to bear the local transportation fees at the port of country B.

Trap 2: Risk of Document Chain Breakage
Entrepot trade requires a complete "document flow" to match the "goods flow". A certain transaction was detained at the customs of a third country due to the inconsistency between the certificate of origin and the port of destination on the bill of lading.

Trap 3: Insurance Vacuum Period
Under FOB conditions, the buyer is responsible for taking out insurance, but there may be an "insurance window period" during the entrepot process - especially when the goods are re-packed at the transshipment port.

• The contract should state "FOB at the transshipment port" instead of simply writing "FOB"
• Require the middleman to provide a complete sample of transshipment documents
• Add a special clause after the trade term: "The buyer is responsible for all additional costs in the entrepot process"

The next time you sign a contract for entrepot trade, you might as well ask more: Is this FOB the real free on board or the "false FOB" that shifts costs? You are welcome to share the FOB traps you have encountered in the comment section, and Zhongshitong trade experts will select typical cases for in-depth analysis.