AN EASY REFERENCE GUIDE ON SHIPPING FOB YOUR FASHION GOODS
When buying or selling garments or other goods across international boundaries, there are certain stringent terms of delivery that need to be adhered to for a successful importation. INCOTERMS are international trade terms which define all rules of engagement with regard to goods delivery to the intended destination or from the seller to the buyer.
are the widely used standards that guide international trade. When it comes to international shipping, FOB and CIF are the most commonly used agreements which determine the responsibility of both the buyer and the seller. At the same time, it defines the point where this responsibility passes to either party.
Difference between Shipping FOB and CIF
First, it’s imperative to understand the difference between FOB and CIF. As mentioned above, both are INCOTERM agreements.
FOB stands for “Free On Board”. Under an FOB agreement, the seller shoulders all transportation costs up to the port of shipment. This includes all loading costs. On the other hand, the buyer is responsible for all marine freight, insurance, unloading costs right from the port of loading. Moreover, the buyer will meet all transportation costs from the destination port to his or her factory. It is important to note that all risk is transferred to the buyer when the goods are loaded on board at the port of shipment.
Under a CIF (Cost, Insurance, and Freight) agreement, the seller should provide minimum insurance for the goods in transit, pay for freight costs and is responsible for all costs of goods in transit up to the buyer’s preferred destination point.
Why should you consider shipping FOB for your garment and textile import?
Having explained the two agreement terms above, considering FOB to import your garments and textiles will give you an upper hand in minimizing overall import costs and increasing your convenience. More often than not, first time importers and people importing small quantities use CIF where convenience is guaranteed. You don’t have to deal with unfamiliar shipping and freight details. Notwithstanding the convenience factor, you may end up paying a fortune to import your textile, garments and other goods under this agreement. This is because the seller will collaborate with his forwarder and is likely to mark up the costs charged by his forwarder to make a profit. As a buyer, you will have no control over the invoice.
When shipping FOB, you have total control over your freight costs. You have the benefit of hiring your own forwarder at an agreed freight rate, among other charges. You will also be able to get exact and timely information from your forwarder, hence solving any service issues or hassles during transit. You will also enjoy transparency on shipping movements, as you have a local contact to provide shipping information, quoted costs for both freight and locals. On the other hand, if you ship CIF, you may not know who the local handling agent is and what their charges will be, which may bring with it inconvenience and additional costs in handling your shipment.
Ultimately, if you decide to ship with an FOB agreement, you will be in control of your shipment. You will be in a position to choose a method of shipment, your own agents, organise for a convenient insurance policy and set your own transit time. With CIF, all the above-mentioned variables are controlled by the seller, which may disadvantage you.
Please download our INCOTERMS quick reference guide or refer to the Australian Customs and Border Protection Service Fact Sheet.
(Note this fact sheet is a general guide only)