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Kahraman Sevindik | INCOTERMS İN SEA TRANSPORTATİON: FOB AND CIF

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INCOTERMS İN SEA TRANSPORTATİON: FOB AND CIF

Incoterms rules are a system developed by the International Chamber of Commerce (ICC) in order to eliminate the problems that may arise as a result of the application of national law in the settlement of disputes in international transportation. It is possible to determine the transition of damage and damage, the way expenses are shared, how to pack and package, who will perform customs procedures, who owns the insurance obligation with the incoterms added to the contract.

Incoterms become binding with the agreement of the parties in order to be applied to the contract. It requires the acceptance that the rules within the incoterms added to the contract in this way will be applied to the contract.

The major difference between FOB and CIF is who will be responsible for the damage to the property.

In Free on Board (FOB) delivery, the responsibility of the supplier ends with the loading of the goods on the ship, and from this moment on, the consigne  is responsible for any damage to the goods. The supplier delivers the shipment on board the vessel nominated by the consigne   at the named port of shipment or procures the goods already so delivered. The risk passes from supplier to consigne  when the shipment is on board the vessel. 

In Cost Insurance and Freight (CIF), the supplier is responsible for any defects that may occur in the goods until the goods on the ship are discounted to the warehouse. The consigne   is responsible for any damage that may occur to the goods after the discount to the warehouse. This shows that the responsibility on the supplier in CIF delivery is higher than in FOB.

CIF, the sellerpays for the insurance to cover the delivery of the goods up to the named port of destination. Deciding on this form of delivery between the parties shows that the financial burden is mostly on the supplier and saves the consigne   from some burden. In case of FOB delivery, transportation costs and insurance costs, although not mandatory, are on the consigne. This indicates that the supplier’s profit will be high.