Differences between FOB and CIF

FOB and CIF are trade agreements, while freight prepaid and freight collect are carriage agreements. Superficially, it may seem that CIF means freight prepaid and FOB means freight collect, but they are not the same thing. For example, a buyer and seller conclude a deal on FOB terms. However, the seller at the port of loading may choose to advance the freight cost, or the buyer may settle the freight at the destination port. To the carrier, the former case is freight prepaid and the latter freight collect, which has nothing to do with FOB. Regardless of who pays and where payment is made, the freight cost under FOB shall ultimately be borne by the buyer.

CIF means the seller pays for freight and insurance, whereas under FOB terms, the seller is not responsible for transportation and insurance. In other respects, both terms are identical regarding customs formalities and risk transfer. In both cases, the seller handles export customs clearance, and risk passes to the buyer when the goods cross the ship’s rail at the port of loading.

1. When a customer books sea freight for export shipments, the booking shall be made in accordance with the export booking instruction. The completed shipping order shall be faxed or mailed to the ocean carrier, or the company’s merchandiser may collect it. The shipping order must specify the following information: a. SHIPPER b. CONSIGNEE c. NOTIFY PARTY d. Port of destination (for shipments to the US, MLB or ALL WATER and state name must be indicated) e. Container type and quantity f. Number of packages, gross weight and measurement g. Freight terms (prepaid, collect, third party payment) h. Description of goods (for dangerous goods, hazard class and relevant precautions shall be stated; for reefer containers, set temperature shall be specified) i. Shipping line or NVOCC (if appointed by you) j. Other requirements, such as fumigation, customs declaration, commodity inspection, etc.

2. If you have a contracted rate with the shipping line or NVOCC, please also fax the rate confirmation from the carrier (the rate shall be invalid without such confirmation).

3. When accepting export bookings, the ocean carrier’s FCL sales staff will review all details of the booking instruction and verify whether the company can meet your requirements. If feasible, space will be arranged as per your shipping order, and space allocation advice will be faxed to you. If the carrier cannot satisfy your requirements stated on the shipping order, the sales staff will notify you promptly.

4. Once space is confirmed, the carrier’s staff will inform you to prepare relevant customs documents (customs declaration power of attorney, verification and write-off document). Meanwhile, please advise the carrier’s staff whether the containers will be stuffed at our warehouse or by truck pick-up.

5. If your goods are to be stuffed at our warehouse, please deliver goods to our warehouse against the warehouse receipt issued by the ocean carrier. The warehouse receipt will state the warehouse reference number, warehouse address, contact number, contact person and latest warehouse-in deadline. Please deliver goods under the reference number before the cut-off time. If goods arrive after the deadline, the ocean carrier cannot guarantee shipment on the scheduled vessel.

6. If door-to-door transportation is required, please notify the carrier’s load planner of the exact location, time and on-site contact person 24 hours in advance (within 300 km) or 48 hours in advance (over 300 km) to ensure our truck arrives on time for loading.

7. Customs cut-off time is 10:00 a.m. one day prior to vessel departure (moved forward for holidays). By this time, goods shall be fully stuffed and placed at the designated area in the port terminal.

8. The ocean carrier will fax you the bill of lading draft one day before loading. If the bill of lading is issued by the shipping line, the carrier will forward the draft to you immediately upon receipt from the line. Please confirm and return the draft before loading to avoid extra amendment fees. After vessel departure, the carrier will issue the original bill of lading within one working day upon receipt of your confirmed draft and send it by courier or merchandiser.

9. The ocean carrier can arrange for advanced dated B/L and anti-dated B/L subject to the rules of the nominated shipping line or NVOCC.

10. The ocean carrier will return your verification and tax refund documents as soon as possible. This normally takes around 10 days excluding inland feeder services.

LCL Booking & Operation Process

Required information: SHIPPER, CONSIGNEE, NOTIFY PARTY, exact destination port, number of packages, gross weight, measurement, freight terms (prepaid, collect, third party payment), commodity description, shipment date, and other requirements such as fumigation, customs declaration, commodity inspection, etc. Please specify the appointed NVOCC on the shipping order if applicable.

2. The ocean carrier will arrange vessel space in accordance with your shipping order and send you the warehouse receipt stating warehouse reference number, warehouse address, contact number, contact person and latest warehouse-in deadline. Please deliver goods under the reference number before the cut-off time. If goods arrive after the deadline, the ocean carrier cannot guarantee shipment on the scheduled vessel.

3. Customs cut-off time is generally 10:00 a.m. one day before vessel departure (moved forward for holidays; subject to our notice in special cases). You shall submit all customs documents to the ocean carrier (or arrange document pick-up by our staff) one day before this deadline. For time-consuming services such as commodity inspection and fumigation, relevant documents must be sent to the ocean carrier in advance (normally 5–7 working days ahead) to prevent export delays.

4. The ocean carrier will fax you the bill of lading draft one day before loading. Please confirm and return the draft before loading; otherwise, B/L issuance may be affected. After vessel departure, the carrier will issue the bill of lading within one working day upon receipt of your confirmed draft and deliver it by courier or document runner. If you require anti-dated B/L, advanced dated B/L or telex release, a written letter of indemnity with your company’s official seal must be submitted. Within permissible scope, the ocean carrier will process your request under standard procedures.

5. After shipment, the ocean carrier will provide you with destination agent details and on-carriage space allocation information for you to arrange customs clearance and cargo collection at destination.

6. Verification and tax refund documents will normally be ready within 7–10 days. You may settle ocean freight with the carrier and collect the tax refund & verification document per mutual agreement.