Incoterms – Should we use FOB or CIF?

Question

I am looking to export some agricultural produce from Kenya to India. Our client has asked for us to deliver the good CIF and will pay 100% when we produce the bill of lading, invoice etc once the produce is loaded into containers. I am not sure but someone else suggested that we should send goods FOB.

Can anyone throw some light on how this works and what path we should take.

thanks
Gaurav

Answer

Gaurav, incoterms are related to the transfer of risk and responsibility rather than payment – that’s more of a contractual issue. FOB would see risk transferred from you to you buyer as the container crosses the ships rail, and that is where your responsibility would end, Seafreight and insurance would be for your buyer.

With CIF, you as the seller would be responsible for the cost of freight and insurance to the “named place” which would be either the arrival port or the buyers premises (usually the port so that your buyer is responsible for the inland transport).

Paying once the goods are loaded on sight of the bill of lading is pretty standard.

So it all depends what you want to pay for as far as the freight is concerned – if you have a good freight forwarder who covers the route use them by all means and ship CIF, if your buyer has a good forwarder ship FOB.

Answer

Hi Gaurav,

David is correct with the above statement and it is very subjective what set of terms you use.

If you want i have an easy guide to terms that i share with my new customers which are confused or unsure about what terms to use.

Drop me an email (stephengarrity@lflogistics.com) and ill gladly send you a copy.

Regards,
Stephen Garrity
Sales Executive
3rd Floor, Centenary House, Centenary Way, Manchester, M50 1RF
Tel: +44 (0) 161 786 2200 | Direct: +44(0) 161 786 7566 | Mobile: +44 (0) 7876 861760
Email: stephengarrity@lflogistics.com

Answer

Hi Gaurav

In addition to the advice kindly offered by Stephen and David here, we do have a couple of good articles here on the site about Incoterms which may help:

http://opentoexport.com/article/incoterms-rules-what-are-incoterms/

http://opentoexport.com/article/international-commerce-terms/

http://opentoexport.com/article/a-guide-to-transportation-and-incoterms/

If these don’t answer your query, let me know and I’ll see if any of our community of experts might be able to help further.

Kind regards,
Philippa

Menu
Export Action Plan