What is the difference between FOB contract and CIF contract?

What is the difference between FOB contract and CIF contract?

The major difference between FOB and CIF is when liability and ownership transfer. In most cases of FOB, liability and title possession shift when the shipment leaves the point of origin. With CIF, responsibility transfers to the buyer when the goods reach the point of destination.

What does CIF stand for?

The abbreviation CIF stands for “cost, insurance and freight,” and FOB means “free on board.” These are terms are used in international trade in relation to shipping, where goods have to be delivered from one destination to another through maritime shipping.

Is CIF a destination contract?

1. The C.I.F. contract is not a destination but a shipment contract with risk of subsequent loss or damage to the goods passing to the buyer upon shipment if the seller has properly performed all his obligations with respect to the goods.

What does CIF mean in delivery terms?

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 …

How does a CIF contract work?

In a CIF contract, the price paid by the buyer would normally be inclusive of all costs up to the agreed port of destination at which point the buyer has a duty to receive the goods. This type of contract as can be seen from above frees the buyer form the seller’s local export customs.

Does CIF include duty?

CIF does not include any import duties, VAT, or taxes. It does include all export requirements. Under CIF, the seller must export and pay the costs to ship to your destination port, but you must import and pay all costs associated with the importation.

What is a business CIF?

A customer information file (CIF) is an electronic file that gives a snapshot of a customer’s personal and financial details. It has a unique CIF number and allows companies to quickly identify a customer’s relationship with the institution.

What is difference between CIP and CIF?

CIF means Cost Insurance and Freight (followed by a destination) which means, the value of goods sold includes cost of goods, insurance and freight up to destination mentioned. CIP means, Carriage and Insurance paid (up to named destination).

Who is responsible for customs clearance?

The declarant is the person “responsible” for the import. He must ensure the goods are legitimate, correctly valued and declared upon import – this includes customs debt, accuracy of the information given in the declaration, the authenticity of the documents presented and the compliance with all obligations.

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.

Which is better FOB or CIF?

It is advised to go with the FOB option for shipping as the buyer gets control over the shipping process and the costs are comparatively cheaper. Whereas in CIF shipping, since the seller has the authority over shipping charges and arranging a ship with the help of a freight forwarder, the cost is higher.

Who pays for CIF shipping?

Cost, Insurance, and Freight (CIF) The seller covers the cost of shipping, and insurance. The seller also obtains the necessary documentation, licenses, and inspections that may be required. The buyer assumes full responsibility for the goods as soon as they reach the destination port under a CIF agreement.

Who pays for unloading under CIF?

Under the CIF Incoterm, the seller agrees to 1) pay for all the costs related to moving goods to a destination port of the buyer’s choosing and 2) insure the goods until they arrive at that port.

How is CIF calculated in shipping bill?

In order to find CIF value, the freight and insurance cost are to be added. 20% of FOB value is taken as freight. Means USD 200.00. Insurance is calculated as 1.125% – USD 13.00 (rounded off).

Is a CIF contract a sale of goods or sale of documents?

A Cost, Insurance, and Freight (CIF) contract of sale is a sale of documents instead of sale of goods.

What are the documents required under CIF contract?

Bill of lading : it should be in the normal form. It is the practice of handling credit transaction to call for negotiable bills of landing. This also ensure clean Bill of lading. Insurance documents: This simply an insurance upon items to give some beneficiary over items.