Why not to use a FOB factory with the Incoterms 2010: the RAFTD are to blame.

by admin on February 18, 2011

On several occasions we have received enquires as to why not to use a FOB factory, in the seller’s facilities with the new Incoterms 2010. Normally, individuals or companies that ask these questions are accustomed to using the RAFTD acronyms. These are trade operation terms created by the U.S Chamber of Commerce. RAFTD stands for Revised American Foreign Trade Definitions. In other words, they are the equivalent of Incoterms for the Unites States.

Blame RAFTD it is all its fault

Blame RAFTD it is all its fault

Under these rules, the term FOB could be used with collection from the seller’s factory, so therefore, it’s logical that some companies still follow this concept, especially those based in the United States or that have worked with companies there.

The RAFTD were created in 1941 and abolished in 1985, although many companies continue to use them, even in the Incoterms 2010. In fact, where an Incoterm was listed (when the Incoterms 2000 were in force), in contracts and official documents, the source had to be stated. In other words, it was obligatory to add Incoterms 2000 ICC (International Chamber of Commerce) in order to distinguish which terms were used and state their source, since there was more than one regulation.

In the new Incoterms 2010 things are different, because these are the only existing terms so it is not necessary to cite a source (International Chamber of Commerce).

According to the Incoterms 2010, the Incoterm FOB is a maritime Incoterm and can only be used for sea transport. The point of cession of risk and cost is the ship’s hold when it is moored in the port of origin. What’s more, this Incoterm should only be used for bulk goods and/or general cargo and not for containers.

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