What are the advantages and disadvantages of CIF?

What are the advantages and disadvantages of CIF?

Advantages and Disadvantages of CIF – Cost insurance and Freight. The advantage to the seller is that it can often obtain cheap insurance and then build a larger amount into its selling price. The advantage to the buyer is that it does not have to worry about declaring the shipment to its own insurer.

What is the disadvantage of CIF?

Disadvantages of CIF Also, due to differences in transportation laws in some countries, costs may be somewhat higher than expected. These additional costs are also called hidden costs. It should be noted that the costs of various services may be higher than the costs that you have previously calculated and planned.

Which is better CIF or FOB?

The advantage of buying FOB is that the buyer can get better deals on freight services, unlike in CIF where the buyer has to rely on the freight services chosen by the seller. This is because the seller might be looking to make profit from the freight services. The buyer therefore makes profit from buying FOB.

What are the advantages of FOB?

Most buyers choose FOB because it’s arguably the most affordable or cost-effective option. Under the FOB terms, buyers do not usually pay the higher fees that CIF protection plans incur. With Free On Board, the buyer has more flexibility and control of the terms, the cost, freight planning, and more.

What is the difference between FOB shipment and FOB destination explain the advantages and disadvantages of each?

Free on board shipping point indicates that the buyer takes responsibility for loss or damage the moment the goods get to the shipper. Free on board destination indicates that the seller retains liability for loss or damage until the goods are delivered to the buyer.

Who pays CIF freight?

Who Pays CIF Freight? The seller must pay for the costs of transferring and shipping the freight as well as insuring the cargo until the goods have been delivered to the buyer’s port.

Who bears the risk in CIF?

RISKS BORNE BY THE SELLER UNDER CIF CONTRACTS: The seller must bear all risks of loss of or damage to the goods until such time as they have passed the ship’s rail[21] at the port of shipment.

Who will claim insurance in CIF?

The difference between CIF and CFR is that while the risk of loss or damage at delivery becomes the buyer’s, the seller is obliged to take out insurance for that risk and provide the buyer with a document which allows the buyer to claim against that insurance.

What is FOB pricing?

The f.o.b. price (free on board price) of exports and imports of goods is the market value of the goods at the point of uniform valuation, (the customs frontier of the economy from which they are exported).

Is FOB shipping safe?

Free on Board, or FOB is an Incoterm, which means the seller is responsible for loading the purchased cargo onto the ship, and all costs associated. The point the goods are safe aboard the vessel, the risk transfers to the buyer, who assumes the responsibility of the remainder of the transport.

What is the difference between FOB and CIF shipping?

The main difference between CIF and FOB is the party that is responsible for the goods while they are in transit. With a CIF agreement, the seller is liable for the goods during transit, and with a FOB, the buyer is liable for the goods during transit.

Which Incoterm is best for buyer?

Best Incoterms for buyers

• FOB: Freight on Board. Under the FOB Incoterm, the seller/exporter will leave the goods at the port of origin, prepared and ready for international transport. …
• EXW: Ex Works. The EXW Incoterm is another good option for buyers. …
• DAP: Delivered at Place.

What are the disadvantages of FOB?

Buyer will not be held responsible for any loss in-transit. Certain disadvantages of FOB Destination are: 1. Sellers will not be able to recover any loss once the goods have been on-boarded.

What are CIF conditions?

Under CIF (short for “Cost, Insurance and Freight”), the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment, pays for the transport of the goods to the port of destination, and also obtains and pays for minimum insurance coverage on the goods through their journey to the named …

Which is better FOB origin or destination?

Destination” contract is a “delivered price” where the cost of transportation is “built in” to the price. On the other hand, the price of the goods specified in an “F.O.B. Origin” contract does not include a charge for transporting the goods from the seller to the buyer.

Who pays for shipping on FOB?

FOB freight prepaid and allowed specifies that the seller is obligated to pay the freight transportation charges and owns the goods while they are in transit. The seller assumes the risk of loss of or the damage of goods during transit. The title of goods passes to the buyer at the buyer’s business location.

Who pays freight on FOB origin?

FOB Origin, Freight Prepaid: The seller/shipper pays the cost of shipping while the buyer/receiver of goods assumes the responsibility of goods at the point of origin. FOB Origin, Freight Collect: The buyer pays for freight and shipping costs and assumes full responsibility for the cargo.

Does FOB destination mean free shipping?

In shipping arrangements classified as FOB Destination, Freight Collect, the buyer is responsible for shipping costs. In FOB Destination, Freight Prepaid & Add arrangements, the seller pays for the shipping costs but then passes on the cost to the buyer.