Why Importers Should Want FOB Terms. FOB/CIF: What Are The Differences
International shipping is a complicated business. Whether you are an importer, exporter, or broker, you need to consider the cost of shipping. Implementing smart strategies will have a dramatic effect on your company’s bottom line.
Choosing the right terms of sale or “INCO Terms” is critical. Two of the most common terms used for air and ocean shipments are CIF and FOB. These terms determine the point at which financial and logistical responsibilities transfer. The point at which the buyer takes over the decision as to how to transport the shipment is one element.
FOB terms allow you to choose a competent, experienced freight forwarder who will work with you to achieve your goals by providing cost-effective solutions, increased visibility, and clear communication resulting in excellent customer service. For all of these reasons and more, Dedola recommends FOB terms.
What CIF and FOB Mean
A freight forwarder that fully understands shipping logistics can help you choose between FOB and CIF. It is essential to know the difference between these terms and what they mean for your business.
CIF stands for Cost, Insurance, and Freight. CIF is an effective way to transport goods if you have a small shipment or if you are new to international trade. Under this arrangement, the seller pays to deliver goods to a port of the buyer’s choosing; the seller also pays for insurance.
Under this arrangement the seller is responsible for the goods from when they leave the warehouse to when they arrive to the port of discharge. It also means that the seller is responsible for picking the freight service providers and agreeing to their terms.
FOB stands for Free on Board or Freight on Board. If you are working with an experienced forwarder like Dedola Global Logistics, FOB is the best method of transportation for transparency and cost reduction.
Under FOB terms, the seller is only responsible for getting the goods to the first port of loading. Once the freight is aboard the ship, it’s considered delivered and becomes the buyer’s responsibility. The buyer must pay the shipping and insurance charges. The distinction between FOB versus CIF is especially vital because you want to understand who’s responsible and liable for the integrity and safety of your goods during each phase of shipment.
FOB gives the buyer more control over when and how their goods are delivered. FOB gives the buyer flexibility to make changes to save costs and or expedite delivery. FOB also allows the buyer to choose a service provider that will provide outstanding communication and customer service.
Benefits of FOB
Dedola recommends FOB terms because it allows companies full control and bargaining power when they are looking for freight services. With CIF, the buyer must depend on the freight service that the seller has chosen, which benefits the seller and is usually not beneficial for the buyer.
FOB gives the importer more control over the shipment schedules and freight services. Communication is often a challenge when shipments that are CIF because the freight service provider was chosen by the seller. The provider is more concerned about the seller, than the buyer. With FOB, the various stages of delivery are much more transparent, which creates an overall better experience and provides insight along the way.
FOB terms offer more control and visibility. With CIF, the seller is negotiating the price of shipping as well as insurance. Since the seller determines the freight service, there is no opportunity to compare or contrast prices, or to pick the most effective freight service. With FOB, the buyer is in control.
Running a commercial business that delivers goods overseas is complicated and costly. Let an experienced handler like Dedola Global Logistics take care of the logistics. If you’re choosing between CIF and FOB for your shipping needs, pick FOB to achieve better visibility, excellent customer service, and cost reductions.
Dedola is an experienced freight forwarder that has long-standing partnerships in 170 countries. We make sure that your goods are where they’re supposed to be when they’re supposed to be there and provide unrivaled service and transparency every step of the way. That’s the Dedola Difference.
Call for a quote today at (800) 516-0399. Let us help you determine the course for your company’s needs.