In international trade, timely payment collection is crucial for maintaining cash flow and the healthy operation of a company. Especially when using the Free On Board (FOB) terms, the seller fulfills its responsibilities after delivering the goods to the carrier. At this time, collecting the balance payment becomes particularly important. This article will discuss in detail how to effectively collect the balance payment under the FOB terms to ensure the safety of funds.

Definition of FOB terms: Under the FOB (Free On Board) terms, the seller is responsible for delivering the goods to the designated port of shipment and handling the export customs clearance procedures. The risk and cost liability are transferred to the buyer after the goods pass the ships rail. This term usually means that the seller needs to receive the balance payment as soon as possible after the goods are loaded onto the ship.

Time Point for Balance Payment Collection: In normal operations, the seller receives the balance payment within a short period after the goods are shipped. The specific time depends on the contract terms, usually within one to two weeks after providing a copy of the shipping documents.

Common Problems:

Delayed Payment:The buyer may delay the payment of the balance payment on the grounds of poor cash flow or the goods not arriving at the port.
Poor Communication:The buyer fails to respond to the payment reminder in a timely manner, resulting in a slow payment process.

Solutions:

Clarify Contract Provisions:Ensure the contract clearly specifies the exact timing and conditions for final payment, such as payment of balance within 7-15 days after receiving bill of lading copy.
Communicate in Advance:Before and after the goods are loaded onto the ship, confirm with the buyer in advance the payment time and method of the balance payment to ensure that both parties have a common understanding of the payment period.
Use Telex Release Bill of Lading:Consider using the Telex Release bill of lading, provided that it is operated after receiving the full balance payment to ensure the safety of funds.
Legal Means:When the buyer delays payment for a long time, remind them of the legal consequences of contract breach and seek legal support if necessary.

Advance Payment Strategy:Negotiate with the buyer to prepay a part of the payment as much as possible, such as 30% advance payment, to reduce the proportion of the balance payment and lower the risk.
Credit Insurance:Consider purchasing credit insurance to counter the risk of the buyers default.
Agent Control:Ensure cooperation with a reputable freight forwarder and clearly instruct the freight forwarder not to release the goods until the full balance payment is received.

In summary, collecting the balance payment is a key link in FOB transactions. It requires the seller to operate meticulously in contract agreements, communication strategies, and risk management to ensure the smooth completion of the transaction and the safety of funds. Through the above strategies and measures, the timely payment of the balance payment can be effectively managed and promoted.