Trade Guide

12 May 2022 • 6 min read

Free on Board (FOB) with Cogoport for Importer

Editorial Team

Incoterms are widely discussed terms in the logistics world. They are shipping agreements which define the trade process for the importers and exporters. Let us look at how FOB makes shipments hassle-free, economical, and easy for Importers?

CIF & FOB – A Comparison

"Risk and Cost Transfer, which used to be a hassle, has gotten a lot easier since our shift to FOB shipment" our client said recently in a conversation while booking shipments with us. This prompted us to dig deeper into the ramifications when importers switch shipments from CIF to FOB. The client, a renowned automobile manufacturer in India, has been working with Cogoport for the past three months and will be saving about 1 million USD (approx 7 crore INR) annually because of their recent switch to FOB.

CIF, or Cost, Insurance, and Freight is an international shipping agreement in which the seller bears the cost, insurance, and freight charges while the shipment is in transit until it arrives at its destination.The risk is then transferred to the buyer at the loading port. There is a division of responsibilities between the seller and the buyer, just like in any other agreement.

FOB, or Free on Board, is an international shipping agreement in which the buyer bears the cost, insurance, and freight charges while the shipment is in transit until it arrives at its destination.

Cost Control of Importer/Buyer & Exporter/Seller in CIF & FOB

Is FOB good for you as an Importer?

Now the question arises: why should an importer pick FOB over CIF, given that FOB places more obligation on the buyer in practice? This is answered when we take a closer look at the CIF procedure. For a first-time shipper, CIF is not recommended. The seller has more control over the process and stakeholder decisions, while the buyer bears the brunt of the consequences. Now because the customer has no say in the shipping line's decision, the seller can pick the one with the higher profit margin, assuring a larger profit margin for himself.

Furthermore, the buyer bears the risk during the entire procedure. Any damage that occurs while the container is in port prior to loading is also the responsibility of the customer. As a result, even though the buyer should ideally bear less risk, CIF makes it unfair for him.

How is FOB with Cogoport better?

Cogoport provides you with a Global Trade Platform, where the buyer has the decision-making power in FOB transactions. The buyer can not only track the shipment but also compare the rates of various shipping lines as well as shipment schedules so they can find the optimal solution to get shipments from POL to POD. You can also make use of an additional credit facility with Cogoport's Ship Now Pay Later once you start shipping with us.

Let us take a detailed look at the service that Cogoport, as your trade platform, helps you with:

  1. The shipment can be prioritized as per your requirement
  2. Comparison of rates between various shipping lines
  3. Tracking shipment updates
  4. Detailed schedule and dates of departure and arrival    

Cost Analysis of FOB

Returning to the conversation that sparked this comparative study and discussion. The auto company described above shipped 200 containers monthly.

Let us take an example. If you are paying your seller 5000 USD per container for a CIF shipment, FOB with Cogoport will reduce it to 4500 USD. This is a result of comparison of rates with various shipping lines, getting the most optimized rates and transparency in the process.

"Only the owner can ensure the finest service," the automobile company's Point of Contact explained, "...and as owner when we chose Cogoport, our control over our shipping rose manyfold." By making Cogoport your shipping partner, you can choose the best shipping agreement along with additional services. If you also wish to make Cogoport a stakeholder in your shipment, BOOK NOW!

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