By Anushua Bag October 10, 2017 Leave a Comment

FOB means Freight On Board or Free On Board. If terms of delivery of a transaction is on FOB, it means that the cost of movement of goods on board of Airlines or on board of ship is borne by the seller. All other expenses to arrive the goods at buyer’s premise has to be met by the buyer.

 

Let us consider this. You are a chemical manufacturer situated near Mumbai, India. The buyer is situated in a place near New York. You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on FOB, Mumbai price of USD 4200. Here the selling cost of goods is USD 4200 FOB Mumbai. So the seller meets all the expenses to carry the goods to Mumbai port and meet all expenses including customs clearance in Mumbai to get the goods on board to Airlines or On Board to Ship. As I have explained, all further cost to reach the goods to the buyer’s place has to be met by the buyer. The buyer commissions a shipping company or airlines and seller ships goods as per buyer’s advice. The buyer pays the cost of freight to the shipping company or airlines. The buyer arranges to insure the goods and pays the cost of insurance.

 

CIF, however,  in exports refers to Cost Insurance and Freight included in the selling cost of goods.

 

Let us consider this. You are a chemical manufacturer situated in Mumbai, India. The buyer is situated in New York. You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on CIF New York price of USD 4800. Here the selling cost of goods is USD 4800 CIF New York. You (the seller) arrange to carry the goods to Mumbai port and meet all expenses including customs clearance in Mumbai and pay the ocean freight or airfreight up to New York, by appointing a shipping line or airlines. In other words, all delivery expenses up to New York is borne by the seller.

 

“Buy FOB, Sell CIF”, if you want to make money in international trade. As a starter, contact us to build a web presence to ship/export your products in global markets in 5 simple steps in 15 hours.

 

  • Register a domain name
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