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WHETHER FOB VALUE IS COST OF GOODS

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QUESTION

Dear Mr. Old Man,

May I ask for your comment of the following query:

L/C states:

45A Description of Goods

THREE ELEVATORS HS 84.28.10.20 , KRONE MONOSPACE 500 AS PER P.I. NO. 1234 DATED 07/07/2014

TRADE TERM: FOB

46A Documents required:

+ SIGNED COMMERCIAL INVOICE IN 4 COPIES SPECIFYING COST OF GOODS

Invoice presented shows as follows:

DESCRIPTION OF GOODS

ELEVATORS HS 84.28.10.20 , KRONE MONOSPACE 500 AS PER P.I. NO. 1234 DATED 07/07/2014

ELEVATOR 1:                                   EUR48,113.00

ELEVATOR 2:                                   EUR47,105.00

ELEVATOR 3:                                   EUR25,606.00

Inland freight costs for pre-carriage:  EUR1,400.00

__________

EUR122,224.00

Total value FOB (Incoterms 2010):  EUR122,224.00

Can we raise the discrepancy “Invoice not showing cost of goods”?

Thank you for your comment and assistance in this issue.

Regards,

Leung KS

————-

ANSWER

Hi,

There may be divided opinions, but in my opinion, there is no discrepancy.

FOB (Free On Board) value is understood as the price paid for the goods plus the cost of transportation, loading, unloading, handling, insurance, and associated costs incidental to delivery of the goods at the port or place of export in the country of export. In other words, FOB value is  the cost of goods on board the vessel at the port of loading. This is a common knowledge that all document checkers know.

The invoice showing as described is deemed to satisfy the LC requirement, hence,  it should be acceptable.

By the way, if the trade term is CIF, e.g., CIF Hong Kong, and the LC requires invoice to indicate cost of goods, insurance and freight, then the invoice should so indicate.

For example,

ELEVATOR 1:                                   EUR48,113.00

ELEVATOR 2:                                   EUR47,105.00

ELEVATOR 3:                                   EUR25,606.00

Inland freight costs for pre-carriage:  EUR1,400.00

——————–

Cost of goods:                                     EUR122,224.00

Insurance:                                            EUR250.00

Freight:                                                EUR20,000.00

———————

Total:                                                  EUR142,474.00 CIF Hong Kong                

Kind regards,

Mr. Old Man

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