What are the risks and benefits of FOB and CIF?
- Author:Cona
- Source:Search Air
- Release Date:2020-01-03
Changinginternational tradeIn the meantime, we ca n’t look at it statically.Trade termFor example, a WeChat friend said, “It is a joke to talk about trade terms without combining payment methods.” Second, risk actually means more things, not just damage or loss of goods. Third, many people actually buy now. Home sellers do not really use the so-called trade terms or even contracts to restrict and regulate their own behavior, but even if the other party breaks, we can also reason, what can we do? International trade disputes are difficult to resolve by lawsuits, and everything must be settled at the negotiation table as much as possible.
Therefore, as sellers, we cannot rely on so-called contract or trade terms. What we need to do is to consider all potential risks as much as possible and reduce the possibility of them to the lowest possible level.
Back to the topic, in the current real international trade,CIF and FOBWhich one is more risky?
My point is that it is unclear, because this is based on the actual situation. So there is no such thing as a standard answer to this question, it depends on who can think of different considerations in more situations.
FOB and CIFWhat are the risks and benefits to know?
★ saidHigh FOB riskThe main points are as follows ★
1. In the case of post-payment, the freight forwarder easily colludes with the buyer, and releases the order to the buyer if the buyer has not paid the final payment.
2. If the customer refuses to pick up the goods, in the case of FOB, because the freight forwarder designated by the customer is not under our control, whether it is return shipping or monopoly, the operation will be very troublesome, and it is easy to generate high detention charges.
3. In the case of FOB, the local cost of the freight forwarder specified by the customer is often higher than in the case of CIF using its own freight forwarder.
4. In the case of CIF, if the production is delayed in time and the delivery is delayed for a few days, it may be possible to apply for LATECOME to meet the letter of credit delivery requirements, but in the case of FOB, it is necessary to get additional freight forwarding to the seller Support is difficult.
In general, FOB is the buyer's control of freight forwarding. Freight forwarding will follow the buyer's instructions 100%, and the LOCAL fee will be relatively higher than the CIF fee.
★ The high risk of CIF is mainly due to the following views ★
1. The CIF process is more complicated. The more complicated it is, the more error-prone it is, and the risk of error comes. In fact, we can give a simple example: the buyer asked to ship before January 15th because the GRI shipping price will rise sharply after the 15th. In the case of FOB, the freight booking booked by the buyer is designated. As a result, if the booking fails, the water boat will be pushed, and the freight rate is increased by 500 US dollars / container, so the responsibility is not on the seller. But in the case of CIF, this responsibility should be properly piled on the seller.
2. CIF shall bear the responsibility before the goods arrive at the port of destination and are picked up by the buyer. We certainly know that this statement is theoretically wrong. Even if the CIF cargo passes the ship's rail, the responsibility and risk are passed on to the buyer. But actually? Ha ha. But of course, this also has to be different for different customers. And in the case of CIF, even if there is a loss, there is also an insurance company's intervention. * I am afraid that the result of CIF forgetting to buy insurance or saving luck instead of buying insurance. I have a friend who just forgot to buy insurance for CIF. So Qiaoboat hit the rocks, and so happened that her container fell into the water, and the responsibility rested on the seller.
★ More in-depth analysis of terms ★
** From an operational perspective
Many companies encourage businesses to do CIF with customers for a simple reason:
1) Freight + insurance can be an additional source of profit.
2) Can avoid local expenses exceeding standards.
3) Effective control of property rights, especially when payment is made after shipment.
But I don't think these are * important. The important thing is that the greater my proportion in the customer's purchasing chain, the greater my core value, and the higher the opportunity cost for customers to replace me. Imagine that I not only provide customers with products, but also make them increasingly dependent on me. At this time, even if a competitor jumps out and tells his customer that his FOB price is 5% lower than mine? Changing me means changing a lot of things for customers.
** From an ideological perspective
From a financial point of view, after the shipment is received, it is a close file, but for B2B sales staff, only the customer also sells the product is considered the end of the sales action. However, this ideology is rarely Someone has it. We often only see the end before the "cargo over the ship's rail", and just use the "cost + expense + profit" way to make a quotation, naively thought that it would be a big deal to delay a large ship, silly I do n’t think it ’s necessary to tell customers a small problem such as leaking a serial number, let alone know the customer ’s channel and offline, and help customers do marketing and promotion. Free On Board, there is nothing for me when the cargo passes the ship ’s rail Already.
You think so, but your competitors don't think so. Their battlefield has already moved forward. They will always pay attention to changes in the market and local exchange rates to help customers avoid risks. They will go to the market with customers to design products and meet offline customers to help with presentations. They will set up overseas overseas. Warehouse for quick delivery, and even set up a branch to help provide after sales, what they have done, what they should not have done, there is only one purpose, to help customers sell the product, and even if necessary The customer takes its place.
Summary
1.Whether it isFOB, CIF alsoOthers are not a static existence. We have to consider practical issues such as payment methods.
2., FOB, and CIFIn fact, the transfer of property rights is actually based on the "delivery of documents" as a node, but because the seller has mastered the freight forwarding, CIF will make the ownership of property rights more solid, especially in the case of payment after delivery.
3. Freight forwarding is a very important part of international trade. Whoever masters freight forwarding will have more initiative. So in general, I actually prefer sellers to do CIF as much as possible. When I was doing sales before, I would quote a CIF price for customers' reference before each shipment, and sometimes doing CIF may bring additional profits to the seller.
4. Ibid. As a buyer, there is more tendency to do FOB. In addition to taking the initiative into consideration, more overseas freight forwarding is basically a one-stop service from shipping to import, and from communication to operation, it can give buyers Provide more convenience.
Therefore, as sellers, we cannot rely on so-called contract or trade terms. What we need to do is to consider all potential risks as much as possible and reduce the possibility of them to the lowest possible level.
Back to the topic, in the current real international trade,CIF and FOBWhich one is more risky?
My point is that it is unclear, because this is based on the actual situation. So there is no such thing as a standard answer to this question, it depends on who can think of different considerations in more situations.
FOB and CIFWhat are the risks and benefits to know?
★ saidHigh FOB riskThe main points are as follows ★
1. In the case of post-payment, the freight forwarder easily colludes with the buyer, and releases the order to the buyer if the buyer has not paid the final payment.
2. If the customer refuses to pick up the goods, in the case of FOB, because the freight forwarder designated by the customer is not under our control, whether it is return shipping or monopoly, the operation will be very troublesome, and it is easy to generate high detention charges.
3. In the case of FOB, the local cost of the freight forwarder specified by the customer is often higher than in the case of CIF using its own freight forwarder.
4. In the case of CIF, if the production is delayed in time and the delivery is delayed for a few days, it may be possible to apply for LATECOME to meet the letter of credit delivery requirements, but in the case of FOB, it is necessary to get additional freight forwarding to the seller Support is difficult.
In general, FOB is the buyer's control of freight forwarding. Freight forwarding will follow the buyer's instructions 100%, and the LOCAL fee will be relatively higher than the CIF fee.
★ The high risk of CIF is mainly due to the following views ★
1. The CIF process is more complicated. The more complicated it is, the more error-prone it is, and the risk of error comes. In fact, we can give a simple example: the buyer asked to ship before January 15th because the GRI shipping price will rise sharply after the 15th. In the case of FOB, the freight booking booked by the buyer is designated. As a result, if the booking fails, the water boat will be pushed, and the freight rate is increased by 500 US dollars / container, so the responsibility is not on the seller. But in the case of CIF, this responsibility should be properly piled on the seller.
2. CIF shall bear the responsibility before the goods arrive at the port of destination and are picked up by the buyer. We certainly know that this statement is theoretically wrong. Even if the CIF cargo passes the ship's rail, the responsibility and risk are passed on to the buyer. But actually? Ha ha. But of course, this also has to be different for different customers. And in the case of CIF, even if there is a loss, there is also an insurance company's intervention. * I am afraid that the result of CIF forgetting to buy insurance or saving luck instead of buying insurance. I have a friend who just forgot to buy insurance for CIF. So Qiaoboat hit the rocks, and so happened that her container fell into the water, and the responsibility rested on the seller.
★ More in-depth analysis of terms ★
** From an operational perspective
Many companies encourage businesses to do CIF with customers for a simple reason:
1) Freight + insurance can be an additional source of profit.
2) Can avoid local expenses exceeding standards.
3) Effective control of property rights, especially when payment is made after shipment.
But I don't think these are * important. The important thing is that the greater my proportion in the customer's purchasing chain, the greater my core value, and the higher the opportunity cost for customers to replace me. Imagine that I not only provide customers with products, but also make them increasingly dependent on me. At this time, even if a competitor jumps out and tells his customer that his FOB price is 5% lower than mine? Changing me means changing a lot of things for customers.
** From an ideological perspective
From a financial point of view, after the shipment is received, it is a close file, but for B2B sales staff, only the customer also sells the product is considered the end of the sales action. However, this ideology is rarely Someone has it. We often only see the end before the "cargo over the ship's rail", and just use the "cost + expense + profit" way to make a quotation, naively thought that it would be a big deal to delay a large ship, silly I do n’t think it ’s necessary to tell customers a small problem such as leaking a serial number, let alone know the customer ’s channel and offline, and help customers do marketing and promotion. Free On Board, there is nothing for me when the cargo passes the ship ’s rail Already.
You think so, but your competitors don't think so. Their battlefield has already moved forward. They will always pay attention to changes in the market and local exchange rates to help customers avoid risks. They will go to the market with customers to design products and meet offline customers to help with presentations. They will set up overseas overseas. Warehouse for quick delivery, and even set up a branch to help provide after sales, what they have done, what they should not have done, there is only one purpose, to help customers sell the product, and even if necessary The customer takes its place.
Summary
1.Whether it isFOB, CIF alsoOthers are not a static existence. We have to consider practical issues such as payment methods.
2., FOB, and CIFIn fact, the transfer of property rights is actually based on the "delivery of documents" as a node, but because the seller has mastered the freight forwarding, CIF will make the ownership of property rights more solid, especially in the case of payment after delivery.
3. Freight forwarding is a very important part of international trade. Whoever masters freight forwarding will have more initiative. So in general, I actually prefer sellers to do CIF as much as possible. When I was doing sales before, I would quote a CIF price for customers' reference before each shipment, and sometimes doing CIF may bring additional profits to the seller.
4. Ibid. As a buyer, there is more tendency to do FOB. In addition to taking the initiative into consideration, more overseas freight forwarding is basically a one-stop service from shipping to import, and from communication to operation, it can give buyers Provide more convenience.