Difference Between FOB and CIF

CIF - Cost, Insurance, Freight ( and ) The seller delivers when the goods pass the ship's rail in the port of shipment. Seller must pay the cost & freight necessary to .

He became a member of the Society of Professional Journalists in At Wim Bosman we support both the Incoterms as the newly introduced Incoterms The shift of responsibility from seller to buyer is considered delivery even though the goods may still be in transit.

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These are freight on board (FOB) and cost net freight (CNF). Other terms such as cost net insured (CIF) and cash against document/delivery (CAD) are also used. Based on the relationship between business entities, the terms are set. What these terms outline is the cost the supplier or buyer pays for shipments.

To be used when delivering to a land frontier. Seller delivers when goods are placed at the disposal of the buyer on board the ship, not cleared for import at the named port of destination. This term can only be used when the goods are to be delivered by sea. This terms is the same as DES with the exception that the seller is responsible to place the goods at the disposal of the buyer, not cleared for import, on the quay wharf at the named port of destination. This term can only be used in sea transport.

This term means the seller delivers the goods to the buyer, not cleared for import, and not unloaded from arriving means of transport at the named place of destination. This term represents maximum obligation to the seller. This term should not be used if the seller is unable to directly or indirectly to obtain the import license.

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EXW - ExWorks and This term represents the seller's minimum obligation, since he only has to place the goods at the disposal of the buyer. FCA - Free Carrier and This term means that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place. FAS - Free Alongside Ship and This term means that the seller delivers when the goods are placed alongside the vessel at the named port of shipment.

FOB - Free On Board and This term means that the seller delivers when the goods pass the ship's rail at the named port of shipment. CFR - Cost and Freight and This term means the seller delivers when the goods pass the ship's rail in the port of shipment. CIF - Cost, Insurance, Freight and The seller delivers when the goods pass the ship's rail in the port of shipment. CIP - Carriage and Insurance Paid and This term is the same as CPT with the exception that the seller also has to procure insurance against the buyer's risk of loss or damage to the goods during the carriage.

CPT - Carriage Paid To and This term means that the seller delivers the goods to the carrier nominated by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. DES - Delivered Ex Ship Seller delivers when goods are placed at the disposal of the buyer on board the ship, not cleared for import at the named port of destination.

DEQ - Delivered Ex Quay This terms is the same as DES with the exception that the seller is responsible to place the goods at the disposal of the buyer, not cleared for import, on the quay wharf at the named port of destination. DDU - Delivered Duty Unpaid This term means the seller delivers the goods to the buyer, not cleared for import, and not unloaded from arriving means of transport at the named place of destination. DAT — Delivered at Terminal named terminal at port or place of destination Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal.

Each type of agreement specifies which party is responsible for the goods and the point at which responsibility transfers from the seller to the buyer. The purpose of this system is to facilitate orderly international trade by providing contract models that are easily identified across language barriers. Each specifies which party is responsible for goods in transit, what insurance is required and who pays freight charges.

The shift of responsibility from seller to buyer is considered delivery even though the goods may still be in transit. With the FOB type of shipping agreement, the seller or shipper arranges for goods to be moved to a designated point of origin.

However, FOB contracts are also used for inland and air shipments. Delivery is accomplished when the seller releases the goods to the buyer. FOB contracts stipulate that this occurs when the goods cross the rail of the ship. When a CIF — Cost, Insurance and Freight — shipping agreement is used, the seller has responsibility for the cost of the goods in transit, providing minimum insurance and paying freight charges to move the goods to a destination chosen by the buyer.

From the point of delivery at the destination, the buyer assumes responsibility for unloading charges and any further shipping costs to a final destination. The crucial difference between an FOB and a CIF agreement is the point at which responsibility and liability transfer from seller to buyer.

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