A Brief Comparison Between FOB & CIF作文

编辑:佚名 发布时间:2009-02-28
[A Brief Comparison Between FOB & CIF作文]

A Brief Comparison Between FOB & CIF

Mi Lina
Class Eight (English Majors), School of Foreign Languages
Ningbo Dahongying Vocational & Technical College

Abstract: According to the INCOTERMS 2000 (International Commercial Terms 2000), there are 13 trade terms. Among them, the FOB and CIF terms, which required to delivery at the port of shipment, are mostly commonly used. The contract under the two terms belongs to shipping contract, and in symbolic delivery nature. That is to say, it provided the exporter fulfills his obligation to deliver the eligible goods in line with the time and site of the contract stipulations, and the buyer are provided to present against corresponding documents (CIF consists of the insurance policy), he fulfills the contract completely…. Finally,this paper deals with the similarities and differences through case studies and analyses.
Key Words: obligations; risks; responsibilities; costs

1、Introduction:
FOB (Free On Board) means that the seller fulfils his obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. “This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point”.
CIF (Cost, Insurance, and Freight) means that the seller must pay the costs and freight necessary to bring the goods to the named port of destination with the addition that he has to procure marine insurance against the buyer’s risk of loss or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium. “The ‘cost’ in CIF term means FOB, so the primary definition of CIF can be equally to FOB pulsing insurance and freight charges”.
There are many similarities and differences between the two terms.
2、FOB trade term 
2.1 Summary
FOB the terminology meaning FOB full text is Free on Board, namely on the ship delivers, in the custom is called on the shipping port ship to deliver. On the shipping port ship the delivery is in the international trade one of commonly used trade terminology. Finalized a deal according to this terminology, responsibly sends the ship by the buyer to receive/and transport the cargo, the seller should in the contract provision shipping port and in the stipulation deadline, installs the cargo the ships which the buyer appoints, and prompt notice buyer. Cargo when loading a ship crossed the broad side, the risk namely shifts from the seller to the buyer. When uses the FOB terminology, business both sides respectively undertake the basic voluntary summary is as follows.
 2.2 The seller’s duty
(1) in the contract provision time and the shipping harbor, hands over on the ship the contract provision cargo which the buyer appoints, and prompt notice buyer. (2) bears the cargo hands over to the shipping port ship on before all expenses and risk. (3)It is proud the risk and the expense, obtains the export license or other official authorized documents, and goes through all custom procedures which the cargo exportation needs. (4) submits the commercial invoice and pays own expenses provides proved the seller already according to the stipulation delivery clean documentary evidence, or has the same level function the electronic information.
2.3 The buyer’s duty
 (1) works out the transportation contract, the payment transport expense, and the ship name, the loading place and the request delivery time promptly informs the seller. (2) is assigned to cargo and the payment loans according to business contract stipulation. (3) all expenses and the risk which after undertakes is assigned to cargo occurs. (4) is proud the risk and the expense, obtains the import permit or other official authorized documents, and goes through all custom procedures which the cargo import needs. The above seller duty and the buyer duty article, the student necessity has not memorized by rote, but unifies the study above article, again compares three, the center "13 Kind of Trades Terminology Data sheet", after will study passes may be very easy to catalog the content memory to get down.
 2.4 Should be noted problems
The above seller duty and the buyer duty article, the student necessity has not memorized by rote, but unifies the study above article, again compares three, the center "13 Kind of Trades Terminology Data sheet", after will study passes may be very easy to catalog the content memory to get down. 2nd, uses the question which the FOB terminology should pay attention (1) "take the broad side as" the accurate meaning ships the port broad side to take the division risk the boundary is FOB, CFR and CIF one of with other trade terminology important differences. "The broad side for" indicated the cargo in installs in front of the ship the risk, including in loads a ship the thing to drop the loss which in the wharf or the sea creates, undertakes by the seller. After the cargo installs the ship, including which occurs in the transportation process or extinguishes in front of setting sail and the damage loses, then undertakes by the buyer.
Links up the question about the cargo according to the contract which the FOB terminology finalized a deal to belong to the shipping contract. However because under the FOB condition is responsible by the buyer to arrange the transport means, namely the chartering subscribes the cabin, therefore, this has a cargo to link up the question. If processes is improper, naturally can affect the contract smooth execution. According to relevant law and convention, if the buyer has not been able according to the customs of the times ship, this to include ahead of time sends without opposite party agreement the ship to send with the detention to the shipping port, the sellers all are authorized to refuse to deliver, moreover from this each kind of loss which produces, like demurrage and the seller increases stores in a storehouse spends and so on, bears by the buyer. If the buyer appoints the ships arrive on time the shipping port, but the seller has not actually been able to prepare the proper cargo, then, from this produces the above expense undertakes by the seller.
The individual country to FOB differently above explained the related FOB explanation all is defers to the International Chamber of Commerce "2,000 General rules" to make. However, the different country and the different convention certainly incompletely unify to the FOB explanation. Between them the difference aspect in the and so on responsibility duty which in the related delivery place, the risk division boundary as well as the seller undertakes stipulation all may manifest. If used "in 1941 in the North America country American Foreign trade Definition Revised edition" center, the FOB summary was 6 kinds, first 3 kinds were in export the country interior assigned location on the interior transport means to deliver. The fourth kind is in exports the place on the interior transport means to deliver, the fifth kind is delivers on the shipping port ship, the sixth kind is assigns the interior place delivery in the import country. Above fourth kind and fifth kind when use should perform to pay attention. Because these two kind of terminology have the possibility in the delivery point to be same, if all is delivers in San Francisco, if the buyer request delivers in on the shipping harbor ship, then should adds on "steamboat Vessel" in FOB and between the port name the inscription, if "FOB VESSEL NEWYORK", otherwise, the seller has the possibility to deliver according to the fourth kind of situation on New York's interior transport means. Even if all is delivers on the shipping port ship, incompletely is same about the risk division boundary stipulation.
3.CIF trade term
3.1 Summary
The CIF full text is Cost Insurance and Freight, namely the cost adds the insurance premium and the transport expense. When uses the CIF terminology deal, seller's basic duty is responsible to subscribe the cabin according to the usual condition chartering, pays the goal port the transport expense, and installs in the stipulation shipping port and in the stipulation deadline the cargo the ship, after loads a ship the prompt notice buyer. The seller also wants to be responsible to handle from the shipping port to the goal port freight transportation insurance, the payment insurance premium. In the service, has personal CIF is "the cost insurance and freight price", this is easy to cause the misunderstanding to cause the loss which in the work should not have. Under CIF condition seller, so long as has submitted the agreement documentary evidence, calculated has completed the delivery duty. When first uses the CIF terminology, business both sides respectively undertake the basic voluntary summary is as follows.
3.2 The seller’s duty
(1) signs from assigns the shipping port to undertake to transport the cargo transportation contract; In the contract provision time and the harbor, install the contract requirement cargo the ship and the payment to the goal port transport expense; After loads a ship must promptly inform the buyer. (2) undertakes the cargo crossed in front of the broad side in the shipping port all expenses and the risk. (3) defers to business contract the agreement, is proud expense to handle the transport insurance. (4) is proud the risk and the expense, obtains the export license or other official credentials, and goes through all custom procedures which the cargo exportation needs. (5) submits the commercial invoice and the usual transportation documentary evidence which takes delivery of goods in the goal port uses or has the same level function the electronic information, and pays own expenses to the buyer provides the insurance policy.
3.3 The buyer’s duty
(1) accepts the related documentary evidence which the seller provides, is assigned to the cargo, and according to contract provision payment loans. (2) undertakes the cargo crossed the broad side after the shipping port all risks. (3) is proud the risk and the expense, obtains the import permit or other official credentials, and goes through all custom procedures which the cargo import needs. Are same with FOB and CFR, the above righteousness must unify the third item of center "13 Kind of Trades Terminology Data sheet" to study, and according to you custom method, will tabulate the content to record the jail.
3.4 Should be noted problems
(1) Safe dangerous other question In the CIF terminology "I" expresses Insurance, namely insurance premium. Is said in the commodity price has included the insurance premium; Says from seller's responsibility, he wants to be responsible to handle the freight transportation insurance. Handles the insurance to have to be clear about the danger to leave, the different danger leaves, the insurer undertakes responsibility scope different, gathers the insurance premium is also different. Finalized a deal according to the CIF terminology, generally when signs business contract, in the contract insurance clause explicitly stipulated the insurance danger, content and so on insurance, like this, the seller do not should defer to the contract the stipulation to handle takes out insurance. But if in the contract has not been able not to wait for the question on the insurance danger to make the specific stipulation, that must act according to the related convention to process.
(2) Symbolic delivery question Looked from the delivery way that, CIF is one kind of typical Symbolic delivery. The so-called Symbolic delivery is aims at the actual delivery to say. Former refers to the seller so long as on time in agrees the place to complete shipping, and submits the contract provision to the buyer including the real right certificate related single card, calculated has completed the delivery duty, but does not need to guarantee the arrival of shipment. Latter is will refer to the seller to have in the stipulation time and the place, will conform to the contract provision cargo to submit for the buyer or it assigns the person, but will not be able to delivery to replace the delivery.
4.Case Study and Analysis
4.1 Contract under CIF term
Case 1
One Chinese export company A exported a batch of clothes to Japan under CIF term. As regulated in the contract, company A had to insure all the risks to the People’s Insurance Company of China and paid by credit. After delivering the goods on date, obtaining the Bill Of Lading from the shipping company, A paid the items at the Bank of China. The next day, the seller received a phone from his partner saying that all the clothes had been damaged because of the big fire burning out in the sea. And the buyer asked the seller for compensation from PICC, or refunded all the payment.
Analysis:The contract of the above is under CIF term. According to INCOTERMS2000, the division of risks or damage to the goods is based on such time as they have passed the ship’s rail at the named port of shipment. Therefore, in this case, the goods are lost during the transit. “So the buyer, instead of the seller, must undertake the responsibilities and ask the insurance company to cover the loss with the insurance which had been conveyed by the seller.”
4.2 Contract under FOB term
  Case 2
In one contract of FOB, the buyer insured all risks with warehouse to warehouse. However, when the goods were carried to the shipping port, they suffered loss which was in the area of the insurance company’s compensation. Nevertheless, the company refused their request though it was regulated in the contract.
Why did the insurance company refuse?
Analysis: According to INCOTERMS2000, under FOB term, the buyer must buy the insurance at his own expenses. Once the seller has delivered the goods on the date at the named port of shipment to the buyer’s ship and acquired the necessary documents, he finishes the delivery. And all risks from the time the goods have passed the ship’s rail at the named port of shipment are transferred to the buyer. Therefore, the buyer only bears the risks after the transfer of the goods, but not the risks before it. Naturally, the insurance company from which the buyer has insured has nothing to do with it. “So the risks referred to in this case is not in the obligation of the insurance company, and it may not pay for the compensation.”
5.   Conclusion
Under FOB and CIF terms, the buyer and seller have roughly the same liabilities of the shipment of the goods, transfer of risks and costs of customs formalities. But under CIF term, it is the seller that must arrange the ship for shipment of the goods while it is the buyer under FOB term. And the ship’s rail can be taken as the point where the seller and buyer decide their risks. The risks happened after the shipment should compensated by the buyer.
FOB cost structures involve the production cost plus any transport costs to the customers. This implies that customers located nearby will have a lower overall cost than customers that are further away. Under the CIF cost structure, every consumer is charged the same price, which commonly reflects the average transport cost. Customers located close to production are “subsidizing” the costs paid by customers located further away. This price structure is common for consuming goods.

Bibliography
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