Question

In: Economics

compare and contrast FOB , CFR , and CIF

compare and contrast FOB , CFR , and CIF

Solutions

Expert Solution

Under a cost and freight (CFR) agreement, the seller has the  responsibility for arranging and paying for transportation of the goods by sea to the destination port.  Documents must also be provided by the seller to clear the cargo through customs. The responsibility of the seller ends when the ship reaches the designated destination port. The buyer is then responsible for unloading costs and transportation costs to the final destination.

Under Free on board (FOB) the seller retains ownership and responsibility for the product only until they are loaded on board a shipping vessel. Once they are on the ship the responsibility transfers to the buyer. The receiver is responsible for arranging and paying for the actual shipping cost from the port of origin to the destination port, and for arranging and paying for transportation to final destination.

Cost, insurance, and freight (CIF) is what a seller pays to cover the costs, marine insurance, and freight against the potential damage or loss to the shipment.


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