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News > FOB > Which is the greater risk for the seller, CIF or FO
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Which is the greater risk for the seller, CIF or FOB?
Release time:2024-01-25

In the current real international trade, which one has higher risks, CIF or FOB? My point is, I can't explain it clearly because it needs to be combined with the actual situation. So there is actually no standard answer to this question, it depends on who can think of different considerations in more situations.

The main reasons for the high risk of FOB are as follows
1. In the case of post payment, the freight forwarder is prone to colluding with the buyer and placing orders with them when the buyer has not paid the final payment.
2. If the customer ultimately refuses to pick up the goods, in FOB situations, due to the customer's designated freight forwarder not being under our control, whether it is for return or resale, the operation will be very troublesome and it is easy to incur high demurrage fees.
3. In FOB situations, the local cost of the customer's designated freight forwarder is often higher than using their own freight forwarder in CIF situations.
4. In CIF case, if delayed production results in a delay of several days in delivery, it is possible to apply to LACECOME to meet the delivery requirements of the letter of credit. However, in FOB case, it is difficult to obtain additional support from the freight forwarder for the seller.
The main reasons for the high risk of CIF are as follows
1. The CIF process is more complex, and the more complex it is, the more prone it is to errors, which poses a risk of error. Regarding this, we can give a simple example: the buyer requested shipment before January 15th, as the GRI shipping fee will increase significantly after that date. In FOB situation, if the buyer's designated freight forwarder fails to book the shipment, it will result in a delay in shipping and an increase in shipping costs of $500 per container. Therefore, the seller is not responsible. But in the case of CIF, this responsibility should be properly placed on the seller.
CIF shall bear the responsibility before the goods arrive at the destination port and are picked up by the buyer. We certainly know that this statement is theoretically incorrect, even if CIF goods cross the loading port's rail, the responsibility and risk will be transferred to the buyer. But actually? Hehe. However, of course, this also needs to be tailored to different customers and situations. Moreover, even in the case of CIF, even if there is a loss, there is still the intervention of insurance companies. The most feared thing is that they forget to buy insurance or have a lucky mentality and do not buy insurance when doing CIF. I have a friend who forgot to buy insurance when doing CIF, but unfortunately the ship hit a reef and her container fell into the water, and the responsibility lies entirely with the seller.

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