Similarities: Both of them belong to maritime contracts, which symbolize the delivery of goods, that is, as long as the exporter puts the qualified goods on the ship issued by the buyer (FOB) or the ship arranged by himself (CFR, CIF) at the time and place stipulated in the contract and submits the freight documents (CIF including insurance policies) that meet the requirements of the buyer, the contractual obligations will be fulfilled. When the goods cross the ship's rail at the port of shipment, the risk will be transferred from the seller to the buyer, which is only applicable to maritime transportation. It is agreed that the seller shall provide the goods and commercial invoices, deliver the goods to the buyer and promptly notify the buyer to go through the export formalities, and that the buyer shall accept the goods, pay the price and go through the import formalities.
Difference: under CFR and CIF, transportation is handled by the seller, and under FOB, it is handled by the buyer; Under FOB and CFR, the insurance is handled by the buyer, while under CIF, the insurance is handled by the seller; FOB is followed by the name of the port of shipment, and CFR and CIF are followed by the name of the port of destination; CFR quotation equals FOB plus freight, while CIF price equals CFR plus insurance.
Second, the advantages and disadvantages of FOB, CFR and CIF in practical business.
Due to the different undertakers of transportation and insurance costs and different quotations, the trade risks brought to buyers and sellers and the export costs of products will be different.
risk factor
Risk factors can be analyzed from the following aspects.
1, performance risk of the contract
According to relevant international practices and laws, once a contract is legally and effectively established, both the buyer and the seller must fulfill their obligations under the contract. However, due to changes in market supply and demand, price drop, buyer's ability to pay or import license, etc., the contract is difficult to perform, even after the buyer receives the letter of credit, he refuses to renew the certificate, the buyer fails to charter a ship in time under FOB terms, and the seller fails to pass arbitration or
However, in actual business, because buyers and sellers are in different countries, their legal systems and citizens' legal awareness are different. Even if the arbitral tribunal makes a reasonable arbitration or the court makes a reasonable judgment, it is sometimes difficult to implement it effectively. Moreover, solving the breach of contract disputes requires manpower, material resources and financial resources. Once the seller is not compensated, the loss will be even greater. Generally speaking, the shipment date stipulated in the contract is more than 30 days after the seller receives the letter of credit issued by the buyer, and some special goods (such as large complete sets of equipment, aircraft, ships, etc.). It will take months or even years to deliver the goods after receiving the buyer's letter of credit. During this period, if the market price of the ordered products falls sharply (especially some sensitive goods and seasonal goods).
Under FOB terms, the buyer considers his interests. Even if the seller has prepared the goods at the port of shipment, he often delays on the pretext of not booking a suitable ship, and some even ignore it, resulting in the seller's inability to ship the goods within the shipment period stipulated in the letter of credit and obtain the negotiation documents, which makes the letter of credit expire. In addition to devaluing the goods and losing the ability to sell them in time, the seller will also increase the loss of storage fees at the port of shipment, especially the loss of fresh and seasonal goods.
However, under CFR and CIF terms, the seller has the initiative in the shipment of goods and is not restricted by the buyer. No matter how the market price of products falls, this risk can be avoided as long as the seller ships the goods within the time limit stipulated in the letter of credit and obtains the response documents.
2. Risk of goods
Because CFR and CIF are transported by the seller, the seller can flexibly choose several companies to carry out timely shipment according to his own stocking situation, which has much less risk of receiving goods, and can also save the storage cost of the terminal and shorten the time of collecting foreign exchange. On the other hand, under FOB conditions, the problem of cargo connection is more prominent, because the seller can only ship the goods after the buyer charters and books the shipping space, and the choice of shipping date is much smaller. If the seller can't ship the goods on the date of shipment stipulated in the letter of credit, the seller can't negotiate with the documents. Even if the seller prepares the goods at the loading port in advance and waits for the buyer's ship to ship, it will increase the seller's storage fee at the port.
3. The buyer cheated in partnership with the shipping company.
Under FOB conditions, shipping companies or shipping agents are generally appointed by the buyer, and it is usually difficult for the seller to find out the credit status of these shipping companies or shipping agents. Even if the investigation is clear, it will cost extra financial resources and manpower, and the negligence of a certain work link will inevitably give some unscrupulous foreign businessmen an opportunity to collude with the ship's side and partner to defraud the seller's goods.
Under CFR and CIF terms, the seller will generally find a shipping company with good credit that he is familiar with to avoid falling into a situation of empty money and empty goods. Therefore, in the case of increasing maritime fraud cases year by year, it is safer to use CFR or CIF in export transactions than FOB.
4. Warehouse to warehouse clause
"Warehouse-to-warehouse clause" is the beginning and ending period of insurance liability, that is, the insurance liability takes effect when the insured goods leave the warehouse or non-storage place of the place of departure specified in the insurance policy, including sea transportation, land transportation, inland river transportation and barge transportation in the normal transportation process, until the goods arrive at the last warehouse or storage place of the destination consignee specified in the insurance policy or other storage places used by the insured for distribution, distribution or abnormal transportation.
Under CIF terms, the seller has gone through the insurance formalities before the goods leave the warehouse at the place of export, so it is completely possible to achieve "warehouse to warehouse". However, under CFR and FOB conditions, the buyer only takes out insurance after the goods are loaded and before sailing, and does not take out insurance from the warehouse at the place of export to the cabin, so "warehouse-to-warehouse" cannot be fully realized, and it can only be "port-to-warehouse". Therefore, the seller has blind spots in FOB and CFR terms, and the risk before the goods cross the ship's rail must be borne by the seller himself.
Under normal circumstances, if sellers want to get reliable protection, they must also apply for insurance for their goods transported by land. The starting and ending time of insurance liability can be determined from the time when the goods leave the warehouse or storage place of the place of departure stipulated in the insurance policy to the time when the goods are loaded, thus connecting with the buyer's insurance. If the goods suffer losses in the process of land transportation or waiting for shipment, the seller can directly claim compensation from the insurer to ensure that their interests will not be damaged before shipment.
5. Right of claim
Under the buyer's insurance clause, the buyer claims as a party to the insurance contract; However, under the insurance terminology of the seller, the buyer is the transferee of the insurance contract, so the seller must endorse the back of the insurance policy before transferring the claim right to the buyer. Under the CIF clause, no matter where the loss occurs, as long as it is within the scope of insurance, it can be compensated by the insurance company because it enjoys the "warehouse to warehouse" clause. However, under FOB and CFR terms, compensation can only be obtained when the goods have lost after crossing the ship's rail, and when the goods have lost before crossing the ship's rail, although the buyer is a party to the insurance contract, the insurance company cannot claim compensation because the loss is not covered by the insurance.
(2), transportation and insurance costs
FOB, CFR and CIF have different external quotations because of their different components. In the current fierce international market competition, most of China's export enterprises actually compare prices. Moreover, with China's accession to the WTO, the foreign trade monopoly system has been broken. After the integration of domestic and foreign trade, more and more enterprises are engaged in export trade, and their price competitiveness will be more intense. Therefore, many enterprises may sometimes affect foreign transactions because of the small price difference. In order to reduce the export cost of enterprises and expand exports, generally speaking, shipping companies and insurance companies in western developed countries have a long history, large scale, strong strength, good reputation and relatively low fees, especially the comprehensive logistics system in western developed countries has developed rapidly recently, which has improved transportation efficiency, shortened time and reduced the loss of cargo damage and cargo difference, thus reducing transportation costs. Therefore, the use of FOB terms has certain advantages, followed by CFR and CIF, which is one of the reasons for expanding FOB exports in China. However, with the rapid development of transportation and insurance in China, this advantage will gradually weaken.
(3) Seize trade opportunities
Most foreign customers who buy a lot of goods from China for a long time are willing to use FOB terms or CFR terms to designate shipping companies for delivery. One of the main reasons is that the buyer can avoid the fraud risk of bill of lading and prevent the seller from countersigning the bill of lading; Second, the buyer chooses a shipping company with good service quality, especially an integrated logistics carrier, which can conveniently and quickly realize high-quality service from port to door; Third, it is convenient and quick to claim compensation from the shipping company or insurance company. In addition, for the export of some "agreement countries", in order to expand trade, we also properly consider using FOB and CFR terms, because the laws, regulations and agreements of these countries (mainly developing countries) stipulate that all goods imported from their own countries must be insured in their own countries. They do this to support and develop their own insurance industry. We should respect the laws and regulations of these countries and let foreign businessmen insure their own goods exported from these countries instead of trading on CIF terms. Therefore, if we overemphasize the prevention of trade risks, we will not use FOB and CFR terms, which will lose many trade opportunities. Any transaction will have risks, and the key is how to grasp it correctly and be really bold and cautious. This will not only prevent risks, but also capture more trade opportunities.
According to the above analysis, China export enterprises can consider risk factors, transportation insurance costs, and seize trade opportunities. From the point of view of avoiding or reducing trade risks, it is safer for sellers to use CIF terms in foreign transactions, followed by CFR, and FOB risks are relatively large. However, considering the factors of transportation insurance premium and trade opportunities in the current actual export business, it is more favorable for the seller to adopt FOB clause in foreign transactions, followed by CFR and CIF. Therefore, in the actual export business, it is not possible to generalize which trade terms are suitable for foreign transactions, but to analyze the specific situation and use FOB, CFR and CIF terms flexibly in time.
The similarities among FCA, CIP and CPT3 are as follows:
1, any mode of transportation is applicable.
2. The place of delivery is the domestic place and the port of export.
3. The risk passes after the carrier disposes of the goods.
4. The risks after delivery shall be borne by the buyer.
The differences between FCA, CIP and CPT3 are as follows:
1.FCA The seller is not responsible for freight and insurance.
2.CPT seller is only responsible for freight, not insurance.
3.CIP seller is responsible for freight and insurance, but the risk is borne by the seller.