Question

Assignment No: (2) ( 15 m)
In a short article of no more than one page, explain the difference between the rules of marine sales( F.O.B) and marine sales( C.I.F).

Answer 1

Cost, Insurance, and Freight (CIF) and Free on Board (FOB) are international shipping agreements used in the transportation of goods between a buyer and a seller.

In CIF, the seller is responsible for transporting goods to the nearest port, loading the goods on the ship and paying freight for the goods to be delivered to a port chosen by the buyer. In FOB trading, the seller is only responsible for taking the goods to the nearest port on his or her end.

CIF is considered a more expensive option when buying goods. FOB contracts relieve the seller of responsibility once the goods are shipped.

CIF and FOB mainly differ in who assumes responsibility for the goods during transit. In CIF agreements, insurance and other costs are assumed by the seller, with liability and costs associated with successful transit paid by the seller up until the goods are received by the buyer. The responsibilities of the seller include transporting the goods to the nearest port, loading them on a vessel and paying for the insurance and freight.2

In some agreements, goods are not considered to be delivered until they are actually in the buyer's possession; in others, the goods are considered delivered—and are the buyer's responsibility—once they reach the port of destination.

Each agreement has particular advantages and drawbacks for both parties. While sellers often prefer FOB and buyers prefer CIF, some trade agreements find one method more convenient for both parties. A seller with expertise in local customs that the buyer lacks would likely assume CIF responsibility to encourage the buyer to accept a deal, for example. Smaller companies may prefer the larger party to assume liability, as this can result in lower costs. Some companies also have special access through customs, document freight charges when calculating taxation, and other needs that necessitate a particular shipping agreement.