Under FOB terms, he lost everything
2022-05-13   Hannah

My college dorm mate MIKE came to see me for a drink because he was so depressed. He had recently met a scammer and had lost 5 containers of cargo money.


What happened was that due to the COVID-19, the freight rates for ocean freight had skyrocketed and many orders could not be taken. It was hard to get a South American customer to ask for 5 containers at once. For his product, an order of 2 containers is usually considered large, and an enquiry for 5 containers made him highly excited.


The negotiations were difficult. Still on freight rates, the customer agreed to MIKE's FOB price, but thought the freight rates were too high to be acceptable. With FOB terms, MIKE had suffered losses before, mainly with foreign buyers appointing freight forwarders with a range of exceptionally high fees at the port of departure and poor service.


The client seemed to be aware of MIKE's concerns and promised that he would discipline his appointed forwarder not to overcharge. The freight rates he had asked for from his country were much lower than MIKE's offer, so it seemed that he would have to accept FOB terms if he was to negotiate this large order.


MIKE was in a hurry to get the order and did not ask for advance payment from the customer, thinking that he had the bill of lading in hand anyway, and in case the customer did not pay, he could ship it back to China or sell it to another country in the middle of the process.


MIKE pinned all his hopes on the bill of lading, and it was on the bill of lading that the problem eventually arose. He got the bill of lading issued by the freight forwarding company designated by the customer, while the customer got a ship-owner's bill of lading, 5 containers of goods reached the port and used the ship-owner's bill of lading to take the goods. 


The bill of lading in MIKE's hands was in fact a scrap of paper.


The client, or rather the fraudster, has now disappeared into the ether.