Business

FOB vs CIF: What Are The Differences?

Soumava Goswami

Business Dec 29, 2023

FOB vs CIF: What are the differences between the two? – There are many differences between CIF and FOB. However, there is one principal difference. In FOB, the seller gives up responsibility for the goods once they are loaded onto the ship. However, in a CIF agreement, the seller has the responsibility for the goods until they reach the destination port. After that, the buyer assumes responsibility.

FOB vs CIF: A General Overview Of Shipping Agreements

According to Investopedia,

“Cost, insurance, and freight (CIF) and free on board (FOB) are international shipping agreements used in the transportation of goods between buyers and sellers. They are among the most common of the 11 international commerce terms (Incoterms), which were established by the International Chamber of Commerce (ICC) in 1936.”

Although the definitions of FOB and CIF differ with countries, both contracts contain details on origin and destination information. These data help in determining the beginning and end of liabilities. Apart from that, these pieces of information also outline the responsibilities of both buyers and sellers based on scenarios.

What Is Free On Board (FOB)?

Under the free-on-board (FOB) agreement, the supplier of the product does not take responsibility for the goods after they go into the shipping vessel. Hence, the supplier pays only for the transport of the good to the port and onto the vessel. As a result, the seller of the product has limited responsibilities for the goods under the contract.

After the goods go into the ship, the buyer of the product takes on the responsibility of the goods. The buyer takes full responsibility once the voyage starts. This includes transport, insurance, and other added fees. The buyer also pays for the unloading of the goods.

What Is Cost, Insurance, And Freight (CIF)?

Sellers use this technique mostly during large deliveries, especially for oversized goods that they ship by sea. The seller of the good takes responsibility for the good until it is delivered to the buyer’s port. The buyer assumes full responsibility for the goods as soon as it reaches the destination port.

Hence, if there are extra costs after the good reaches the destination port, the buyer will need to take responsibility for the same. After the payment, the transport service transfers the documentation for the goods over to the buyer.

FOB vs CIF: Major Pros And Cons

According to an article on Alibaba.com,

“With a CIF agreement, the seller is liable for the goods during transit, and with a FOB, the buyer is liable for the goods during transit. […] Generally, FOB is considered a more cost-effective approach. This is because buyers can make more cost-effective decisions about the shipment, such as buying the minimum insurance policy or going with a lower-cost freight company since they are in control.”

The following are the major pros and cons of FOB and CIF that you must know:

Pros And Cons Of Free On Board (FOB)

Here are the major pros of FOB that you will benefit from:

The buyer of the product has more control over the delivery process.
It is possible for the buyer to make various cost-effective decisions in some cases.
The seller does not have to take responsibility for added costs.

Here are the major cons of FOB that you need to be aware of:

Since the buyer has more responsibilities, the individual will need to deal with added costs if necessary.
If the goods are damaged during transit, the seller is not responsible for that. This might send the buyer into an absurd situation.

Pros And Cons Of Cost, Insurance, And Freight (CIF)

Here are the major pros of CIF that you will benefit from:

The seller has more control over the goods delivered to the customer.
Also, the buyer of the product has little to no responsibility when it comes to the delivery of the product.
The buyer gets a more seamless experience with the CIF process. As a result, the delivery process is less stressful for the buyer.
As the buyer is getting more convenient with this process, it gives the seller a certain advantage over its competitors.

Here are the major cons of CIF that you need to be aware of:

The seller has to take full responsibility for the damage to goods in transit.
Buyers of the product have little to no control over the cost of the delivery process.
There can be additional costs for sellers. This raises the costs of the goods at the time of delivery.

FOB vs CIF: Which Is The Best One To Buy?

During international shipping, most companies opt for either Free on Board (FOB) or Cost, Insurance, and Freight (CIF) agreements.

According to Investopedia,

“Inexperienced buyers typically prefer CIF, which places much of the shipping responsibility on the seller, including shipping costs, insurance, and freight to the destination port, while giving the buyer greater convenience. However, because the seller takes on more risk and responsibility, CIF often comes with a higher cost.”

Basically, in CIF, the seller of the product takes care of almost everything up to the final delivery at the destination port of the buyer.

On the other hand, the ones that have enough experience in international shipping tend to prefer FOB. This is because they have more control over the goods in this case. When the goods leave the ship, the responsibility for the goods goes to the buyers. The seller considers the goods as delivered once they clear the goods for export and load them onto the shipping vessel.

Apart from that, the FOB also offers flexibility over logistical details. These are to learn the needs of the buyer and to lower the costs since the seller cannot negotiate directly with shipping companies.

On a side note, the scale and expertise of the company also determine the choice between FOB and CIF.

Wrapping Up

FOB vs CIF: Hope this article was helpful enough to provide accurate information. You can see from the article that, in general, sellers choose FOB more than CIF. However, if it is a big item and you want to have more control as a seller, choose CIF. Consider sharing your ideas and opinions with us in the comments section below.

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Soumava Goswami

Inspired by The Social Network, Soumava loves to find ways to make small businesses successful – he spends most of his time analyzing case studies of successful small businesses. With 5+ years of experience in flourishing with a small MarTech company, he knows countless tricks that work in favor of small businesses. His keen interest in finance is what fuels his passion for giving the best advice for small business operations. He loves to invest his time familiarizing himself with the latest business trends and brainstorming ways to apply them. From handling customer feedback to making the right business decisions, you’ll find all the answers with him!

Balistrieri

April 27, 2024 at 8:15 am

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Preparing To Welcome A New Disabled Employee

It wasn't that long ago that people with disabilities were shunted aside from daily life, left alone to cope with their problems. Fortunately, much has changed for the better now as society has become more aware and accepting of those that are different, giving the disabled a new lease on life. One of the areas where things have improved is in employment. We have finally learned that people with disabilities are capable of much more than they were formally thought to be, and the advantages of hiring disabled workers are actually manifold. Introducing A Disabled Employee To The Work Culture This is not to say that there are no attendant difficulties with welcoming a disabled employee into your company; of course, there are, but nothing that can't be surmounted with patience and planning. Here are some of the steps you can take to make your business inclusive that go beyond the hiring process and will help everyone involved work together with confidence and respect. Implement company-wide training, preferably by an experienced consultant. There are three tiers to this: Leadership Having the top brass buy-in is going to imprint on everyone else how important this is. Seeing the company president get the same training as everyone else goes a long way to negating the stigma and fear that surround the disabled, showing that you are all in this together. Read Also: Effective Ways To Track Your Employees’ Work Supervisors Perhaps the most crucial player in all this management needs to feel secure in their relationship with the disabled employee by having an understanding of what they can and sometimes cannot do on the job. They will naturally feel fear of making mistakes and need to feel the freedom to voice their concerns and be given the specific tools to properly manage people with disabilities respectfully and with achieving success together firmly in mind. Co-workers The people on the front lines need to have clear and applicable training on disability inclusion and awareness. The training will help them feel more comfortable and able to engage better with their new disabled co-worker. It is also very important to provide appropriate support for employees with disabilities on the job. The best method is to have long-term support strategies in place, which might include necessary accommodations and assistive technologies. Include everyone in the implementation of these steps so they will understand you are all in it together, and feel like part of the solution to problems, rather than fearing them. 6 Steps To Make A Workplace Friendly For Disabled Workforce Disabled employees might be more talented and capable than one might think. As a leader, you must not focus on their disabilities. Rather treat them just like a usual employee so that he doesn’t feel distinct. Given below are some steps to create a welcoming workplace for physically challenged employees: Inhibit Ableist Language One of the first steps is to include discouragement of ableist language while addressing these employees in the awareness campaigns. There might be certain terms included in the program which must not be used for a person with disabilities. The answer is quite simple: make use of terminology a disabled individual prefers. Languages like clumsy, lazy, deaf, lame, fat, short, skinny, etc should never be encouraged within an organization. Recognize Disability-Related Communication Styles Our minds are often impacted by both visible and invisible forms of disabilities. Like, those having mobility impairments and using crutches or wheelchairs are usually considered “too slow.” Employees with cognitive or sensory disabilities communicate in a different way that might be a bit complex to comprehend. Coworkers must be taught to be a little more patient and understanding towards a disabled person. Refrain From Making Insensitive Jokes Encouraging or tolerating jokes about disabilities is the most unethical activity performed within an organization. Additionally, it is significant to keep in mind that disabled individuals are already under tremendous social pressure. The use of insulting words, even if the employee says he is fine, must always be refrained. With reputation and time, they might develop an increasingly dispiriting and hostile environment for physically challenged employees. Conduct Accessible Company Events Whether an event within the organization is formal or informal, always try to conduct it, keeping in mind your disabled workforce. They must get the opportunity to participate completely in all social events. Generally, it is a great idea to give up on venues having numerous stairs and no wheelchair accessibility. If possible, try to arrange transport options for this particular set of employees so that nothing holds them back while proceeding further. Offer Accommodations Quietly, Not Secretly Never make a spectacle of all the special arrangements and accommodations you provide to a disabled employee. It is a better idea to refrain from the temptation of hovering as well as micromanagement in a visible way. Also, never discuss these in front of the rest of the workforce. Although accommodations are not a dark secret, you must not talk a lot about it. Well, that’s the sign of a great leader! Take Immediate And Necessary Actions Whenever Needed While this point bears a resemblance to the first one, you must take necessary actions against disability discouragement. There should be no acceptable space for managers or coworkers to let a disabled employee feel down. If you find someone doing it once, shush it off by providing a warning. But if things get repeated, it’s better to take immediate action against it. Set an example so that nobody encourages such behaviors. Wrapping It Up Everybody in the workplace wants to feel valued. Employers should be looking for ways to keep their employees engaged, and in that way, they can increase their retention over the years because nothing is more valuable than a seasoned employee of any ability. Presentations from company leadership are a valuable form of direct messaging to instill the sense of teamwork needed for the best level of inclusion. If this is the first time you have hired a disabled person, use what has been learned as a template for the next one. The government is also ready to help with its support programs. With this, I bring my article to an end. Disability is a sensitive issue, and I hope my write-up encouraged you all to be more thoughtful co-workers. Thank you for reading! Read Also: 8 Best Practices For Managing Remote Teams The Importance Of Keeping Your HR Team Certified Seven Potential Tax Credits Available To Small Businesses In 2023

5 Reasons To Work On Your Customer Service

The customer is always right, so keeping them happy should be at the top of your priority list. One of the best ways to do so is to provide excellent customer service that they’ll never forget. With so many options available to consumers nowadays, great customer service has really become a way for businesses to stand out above the crowd and leave a lasting impression. This is why you need to spend some energy improving your customer service this year. Need more convincing? Keep reading for more. Improve Customer Satisfaction Great service leads to satisfied customers, and satisfied customers will always come back for more. By working on your customer service and improving your customer contact centers, you can ensure that customers are receiving prompt assistance, personalized interactions, and quick and practical problem-solving from your team. This will encourage loyalty and positive feedback that will boost your business. Build Customer Loyalty A satisfied customer is also a loyal customer, or so the statistics say. When customers are treated well, responded to in a timely manner, and have their problems solved, they develop a sense of trust and connection with your brand. Developing and managing customer loyalty can make a significant difference to your business. Loyal customers are more likely to make repeat purchases and recommend your brand to their friends and family too. Gain A Competitive Edge As we mentioned, great customer service has become a way to stand out in the crowd, and in this digital age, this is a crucial factor to consider. Great customer service is often the only difference between two competing businesses, so make sure that you have the upper hand. By investing in your customer service strategy, you prove to your customers that their experience matters to you, leaving a positive lasting impression. Increase Your Revenue It might not feel like it, but improving your customer service can have a direct impact on your revenue. As we’ve already explained, customers who have a positive experience are more likely to come back and even recommend your products. This means that by working on how your handle customer queries, complaints, and feedback, you can drive revenue growth and boost your profitability. If this isn’t a great incentive to start working on your strategy, we don’t know what is. Gain Valuable Insights Finally, remember that you can use a good customer service strategy for your own benefit too. When your customer service is managed well, you’ll be able to gather plenty of feedback and other data from your consumers. This information might pertain to their perception and experience of your business, as well as their buying behaviors. By analyzing this data, you’ll be able to make better decisions, refine your products and services to better suit your audience, and contribute to long-term success for your company. Final Thoughts Customer service might be the last thing on your mind in such a fast-paced environment, but we hope that this article has shown you why it should move to the top of your list. Improving your customer service is a smart strategic move that will see lasting benefits for your business. Read Also: How To Improve Energy Efficiency In Your Data Centre Money Tap Loan App: Information, Eligibility Criteria, Interest Rates, Review & More Virtual Data Rooms: What They Are And Their Critical Importance For Businesses

What Is Free Alongside Ship? Essential Things To Know About It

In international business, Free Alongside Ship is a contractual term that is used in international exports most of the time. It stipulates the fact that the seller must make the arrangements for the delivery of the goods. The goods must be delivered to the designated ports. It must be next to the specific vessel for smoother transfer. When contracts between the buyer and seller take place on an international contract, then these inco terms come into action. Free Alongside ship includes all the details like the time and delivery of the goods. The payment due and which parties pay the cost of freight and insurance are all present in this contract. You need to understand the reality while you use this contract at the time of shipping. Read More: BackMarket: A Complete Guide On It What Is Free Alongside Ship? "Free Alongside Ship" (FAS) is an Incoterm used in international trade. Incoterms are standard trade terms used globally to clarify the responsibilities of buyers and sellers. It includes the delivery of goods, costs, and risks involved in the transportation of goods between parties. What Are The Obligation Of FAS For Exporters? There are several obligations of FAS for Exporters. You need to be well aware of it while attaining your goals with complete ease. You must not make your selection and choices of the Inco terms out of the dark. 1. Delivery & Preparation For Export The seller is liable for delivering the goods to the vessel at the named port of shipment. This includes ensuring that the goods are ready for export and placed at the specified point near the ship. You must make the proper preparation for the export to reach your goals with ease. 2. Export Customs Clearance The seller must complete export customs formalities. It will help you to obtain any necessary export licenses or documentation and cover the costs related to export clearance. You need to get through the complete details to have a better idea of it. The custom clearance forms an essential part of free alongside ship. Furthermore, it can make the shipment process easier for your business. 3. Delivery Cost To Port The seller covers all expenses and risks involved in delivering the goods to the named port of shipment. This includes costs such as transportation, packaging, loading charges, and any fees necessary to bring the goods to a specific location. Free alongside ships can help exporters get over these kinds of obligations with ease. 4. Risk Transfer The seller's responsibility ends once the goods placing is done beside the vessel at the agreed-upon port. From that point forward, the risk is transferred to the buyer, who assumes responsibility for the goods. The transfer of the risk will be easier, and it will reduce the overall burden on the team members. Try to follow the best process that can make the shipment process easier for you. 5. Export Duties & Taxes The seller typically does not bear responsibility for export duties and taxes. However, they are responsible for any costs associated with the goods until they are placed alongside the vessel for export. The collection of the export duties and taxes becomes easier with the free Alongside Ship. It is one of the biggest obligations of this process to the exporters. 6. Notification To Buyers The seller should inform the buyer once the goods reach alongside the ship. They need to provide the necessary documents or information to enable the buyer to take over the goods. It will help to arrange for their transportation, insurance, and any further handling. You must be well aware of the notifications that can bother you in the long run. Ensure that you follow the correct process from your end. What Are The Obligations Of Free Alongside Ship For Importers? Along with the exporters, it comprises several obligations for the importers of the goods as well. You need to be well aware of the facts while meeting your needs with ease. Ensure that you follow the perfect process in this regard. 1. Goods Arrival At Port The buyer is liable for arranging and paying for the main carriage of the goods. Starting from the port of shipment to the final destination. This includes organizing transportation, handling, and any necessary logistics from the named port of shipment to the desired destination. It is the first kind of Free Alongside ship obligation a buyer needs to face. You need to understand the reality while attaining your aims. 2. Risk Assumption Once the goods placed alongside the vessel are done at the specified port, the risk transfers from the seller to the buyer. The buyer bears the risk for any damage or loss that may occur after the goods are delivered alongside the ship. It is another important part of the obligation that the importer needs to take care of while considering free alongside ship. 3. Import Customs Clearance The buyer is responsible for completing import customs clearance procedures and paying any relevant duties, taxes, and import fees. Obtaining necessary permits or licenses, and handling any other formalities required for bringing the goods into the country. You must focus on the import of customs clearance to make things easier for you in all possible manners. 4. Transportation & Insurance The buyer arranges and pays for the transportation of goods from the named port of shipment to the final destination. Additionally, buyer is responsible for arranging insurance coverage for the goods during transit, ensuring protection against potential loss or damage. Transportation and insurance must go hand in hand. Otherwise, everything will become difficult for you in the long run. 5. Notification To Seller It's essential for the buyer to inform the seller once the goods you receive alongside the ship. They also need to provide any necessary documentation to confirm the acceptance and receipt of the goods. Read More: What Is Mortgage Buydown? Essential Things To Know About It Final Take Away Hence, these are some of the core essential factors of Free alongside ship that you must be well aware of. You cannot just make your choices out of the grey. Ensure that you follow the correct process from your end. You can share your views and opinions in our comment box. It will help us to know your take on this matter. Once you make the correct choices from your end shipment process will become easier. Let's Find out The Best Articles By Clicking Below!! Cost Insurance Freight? Everything You Should Know About It What Is Consignment? – Importance, Working, Examples, And More What Is Bottleneck In Business? Everything You Should Know About It

What Is The Defeasance Clause?-Everything You Need To Know

Do you want to get the whole idea about the defeasance clause as it is an essential part of your business if you start as a young entrepreneur? When you want to start your business as a young entrepreneur, you must know about all the essential factors required for accumulating money for your business. Several factors are essential for your business to grow well in all aspects for your business. First, work out the plans that can help you to achieve your goals in the right way. Now, let’s get some ideas about this Clause. What Is The Defeasance Clause? It is found in the deed of a mortgage. Here the lender commits to paying the property’s title ownership after clearing all the mortgage payments. Once all the borrower like you clears all the payments in the mortgage, the defeasance clause becomes a binding contract. First, the deed of the mortgage gets nullified, and afterward, the contract. Second, it conveys the property’s title to the borrower. The defeasance clause makes the borrower get the clear and free title once all the debts are cleared. Now, to get the complete details of this clause, there are several factors that you have to take care of at your end. A Brief About Mortgage Theory In the past, when any lender grants any mortgage loans, then it will demand defeasible fees. For the property as security for ensuring the complete repayment of any debt. Under the mortgage theory, the lender is offered the defeasible title for the property. The defease claws would challenge the lender’s security, and it will also provide access to the borrower to regain security. Thus, you can quickly recover the ownership of the property once you arrange the same. Lien Theory For The Defeasance Clause There are many states in the USA that do not require the defeasance clause for the mortgage agreement. Instead, the borrower grants the lender or the lien by signing the mortgage agreement. If the borrower does not provide a mortgage agreement, you can acquire the rights of the property by initiating and completing the foreclosure procedure. The lender will not be awarded the Defeasance Title under the lien theory. So, along with that, there is no need for the defeasible clause. How Does The Loan Defeasance Clause Work? It is a provision of the mortgage agreement that has a strong correlation with the land and the real estate property. The mortgage promises that the mortgage will regain the title upon their property on making the full payment of the mortgage. This is the core method of how the defeasance clause works. Loan Security You can get the clause to work for getting the loan security to work for the borrowers. It will help to secure the payment of the land until the full payment is being made. Unfortunately, in the mortgage agreement, all the states do not require the defeasance clause. Many states provide the property’s title to the borrower even if the mortgage is not paid off. The lender does not have the title and the rights on the property unless the property is being foreclosed following any default browser. It is one of the best ways to get a business loan in a short period. Assignment Of Title The time when you protect the lender for getting the defeasance clause ensures that the home buyer will regain the unencumbered as well as one of the free titles to the property once all the payment is made to the lender of the property. When the home buyer makes the final payment, the lender will be allotted the proper rights of the property which they will have on it. Benefits of the Defeasance Clause There are several benefits of the defeasance clause that you need to take care of while you want to develop your business properly. Some of the Core benefits of the defeasance clause are as follows:- The defeasance clause will impose an obligation legally to the lender for transferring the property’s clear title to the borrower once all the loan is cleared. Another big advantage of the defeasance clause is that it will eventually make you the property’s owner, granting the defeasance rights to the property’s lender until the mortgage is fully cleared. The Defeasance clause will allow a person to become the property owner even if that person does not have enough funds left with him at a particular point in time. Application Of The Defeasance Clause In Real Estate The application of this clause is essential for your business. It can help your business to move in the right direction in a short time frame. This is because the title of the property is related in regards to the mortgage as well as the loan agreements. It executes the deeds of the defeasance clause in real estate. It provides the exchanges of the fund to the banking property. Prepare the appropriate plans that can work well in your favor. Work out the plans that can help you to achieve your business goals in the right direction. Application of The Defeasance Clause In Mortgage The lender keeps the title of the property in some of the loans and agreements. The mortgage requires the defeasance fee of the property in return for getting the funds. You can be the owner of the property with fewer hassles once you make use of this clause. Better planning with the help of this clause can make things easier and effective for you. What Are The Exceptions To The Defeasance Clause? There are certain exceptions to the defeasance clause that you must consider some of the effective factors that can make things work perfectly well for you. Some of the essential exceptions to the defeasance Clause. 1. Payment Of Outstanding Debt Typically, one of the main exceptions to a defeasance clause is that the borrower or issuer must fully repay the outstanding debt. This includes not only the principal amount but also any accrued interest and fees. Once the debt is paid off, the defeasance clause may come into effect. 2. Fulfillment Of Covenants The borrower or issuer may be required to fulfill certain covenants or conditions specified in the contract. These could include maintaining a certain credit rating, providing financial reports, or meeting other financial performance metrics. Failure to meet these conditions can prevent the defeasance clause from being triggered. 3. Timing & Notice Requirements Many defeasance clauses have specific timing and notice requirements that must be adhered to. For example, the borrower or issuer may need to provide advance notice to the bondholders or lenders, and the defeasance must occur within a specified timeframe. 4. Payment Source Restrictions Some defeasance clauses may specify the sources from which the funds for repayment or defeasance must come. This could include restrictions on using certain types of funds or assets. For example, the clause may require that the repayment comes from a segregated account or specific investments. 5. Consent Of Bond Holders & Lenders In some cases, the consent of bondholders or lenders may be required before the defeasance clause can be invoked. This is often the case in bond agreements, where bondholders may need to approve the substitution of collateral or changes to the terms of the bond. 6. Legal & Regulatory Compliance The borrower or issuer may need to ensure that the defeasance complies with all applicable laws and regulations. This can include tax laws, securities regulations, and other legal requirements. 7. Trustee Or Third Party Approval If a trustee or third party is involved in overseeing the terms of the contract, their approval or confirmation may be required for the defeasance to proceed. It's essential to carefully review the specific terms and conditions of the defeasance clause in any financial contract, as these can vary widely depending on the agreement and the parties involved. Legal counsel and financial experts are often consulted to ensure that all requirements and exceptions are properly understood and followed when invoking a defeasance clause. Final Take Away Hence, these are some of the essential facts that you have to take care of while you want to use the defeasance clause in the mortgage loan agreement to claim the ownership right of the property in the best possible manner. Make things happen in your favor while you want to improve and develop your business in the right direction in a short time frame with a minimum effort. Try to make the correct choices in a short period while growing your business in the right direction within a short time frame. Work out the best plan for your business. Read Also: Why Create A Powerful Business Continuity Plan? What Is Network Marketing And How To Do It In 2021 How To Start A Business In 2021 – Best Business Strategies

FOB vs CIF: What Are The Differences?