Common terms for shipping. 1. Trade terms: FOB/CIF/CFR are most commonly used
FOB, that is, free on board (… designated port of shipment). That is, the seller delivers the goods after sending them over the ship’s rail at the designated port of shipment, and the buyer shall bear all costs, risks, loss or damage of the goods, and require the seller to handle the export customs clearance procedures for the goods separately. This term applies to sea or inland waterway transportation.
FOB usually specifies the goods, usually the shipper, consignee, notify party, designated shipping company, designated shipping sales price, sales cost, sometimes designated freight forwarding company, etc. designated by foreign customers. In this case, the freight forwarder can earn agency fees, but if the goods are shipped steadily, the profit will also be huge. FOB exports have accounted for 80% of China’s total exports, forming a model in which freight forwarders designated by foreign customers serve them. Who represents the country, the choice and control are entirely up to foreign buyers. Therefore, if domestic freight forwarders want to find their own business, they must establish contact with overseas buyers and act as designated freight forwarders for overseas buyers in China.
CFR or CIF, that is, cost plus fee (… designated destination). The seller must pay to transport the goods to the designated port of destination, but from the time the goods are delivered to the ship’s deck, the seller shall pass on the risks, loss or damage of the goods, and the additional costs incurred after the accident, after the goods have crossed the ship’s rail at the designated port. In addition, please ask the seller to handle the export customs clearance procedures for the goods. This term applies to sea or inland waterway transportation.
CIF-Cost, Insurance and Freight (………port of destination). In addition to assuming the same obligations as the term of transportation cost and freight, the seller must also handle the purchase of marine insurance for loss or damage of the goods during transportation by the buyer and pay the insurance premium. This term applies to sea or inland waterway transportation.
2. The same is true for FOB/CIF/CFR.
The common points are:
1. Both modes of transport are applicable to sea and inland waterway transportation, and other modes of transport are different.
2. The place of delivery is the port of shipment, that is, the seller delivers the goods at the port of shipment. Pay special attention to the CIF term, delivery at the port of shipment, not the port of destination.
3. The boundaries of risk transfer are the same, that is, the exporter transfers the risk of the goods crossing the ship’s rail to the importer at the port of shipment.
4. They all have symbolic meanings.
There are two differences between the three:
1. The two parties to the transportation have different divisions of labor in transportation and insurance. The FOB term means that the importer is responsible for transportation and insurance, the CIF is responsible for transportation and insurance by the exporter, and the CFR is the exporter’s transportation and the importer is responsible for insurance.
2. The price structure of the goods is different. FOB is only the cost price, CIF is “commodity cost + insurance + freight”, and CFR is “commodity cost + freight”.