FOB Price & CIF Price

What is FOB, CIF, C&F Prices ?

Freight-on-Board (FOB) cost structures involve the production cost plus any transport costs to the customers. This implies that customers located nearby will have a lower overall cost than customers that are further away. Under the Cost-Insurance-Freight (CIF) cost structure, every consumer is charged the same price, which commonly reflects the average transport cost. Customers located close to production are "subsidizing" the costs paid by customers located further away. This price structure is common for consuming goods.

Why the hell did you ask this question here???

It's FREE on board.

Why the hell did you ask this question here???

Because he knows this forum is frequented by intelligent people...

Why the hell did you answer? Especially if you are going to give incorrect information?

Luckily others have given correct responses. I will help out if I can by added my response backed by 35 yrs experience as a Customs Broker. I just lurk around these fourms to learn the technical stuff I need to know to properly classify the goods my clients bring into Canada. Oh and to throw in my 2 cents when the folks who accually do stuff need help dealing with the folks who do nothing but create red tape at international borders.

FOB = Free on Board (location) Usually there will be a defining destination used with the FOB term. For Example FOB Hong Kong port, this would mean that for the price quoted by the seller the goods will become the buyers responsibility at the Hong Kong port after being loaded "on board" the exporting vessel. Getting them to your location from there will be the buyers problem and all freight and insurance costs (and risks) will be borne by the buyer. With out going into a huge amount of detail on "value for duty" the FOB cost is usually the value you will pay duty and tax (if any) on in the receiving country. And yes FOB IS one of the accepted incoterms.

CIF = Cost Insurance and Freight. This means the seller has included in the price of the goods the amount of freight and insurance to the destination port. The CIF cost of the same goods will vary greatly depending on the distance of the buyer from the factory. Freight and insurance costs are not subject to duty and taxes (at least not in Canada) so if you are buying goods CIF you should obtain documentation detailing exactly what the freight and insurance costs are even though you are not paying those charges directly.

Dear Guest,

I really appreciate your answer to the original querry, but I dislike the way you have asked the question as it defeats the sole purpose and harms the feelings.

Regards,

Ulhas Pradhan

FOB, also called ex factory or ex works, does not include the cost of freight to deliver the goods. CIF, or delivered price or freight allowed, does include the freight and insurance costs.

FOB means Free On Board. Which means that local cost of transportation and clearing agents charges are included.It does not mean Ex-Works price. CIF means Cost+Insurance+ Freight are included. It is the cost customer has to pay till it reaches destination port.

Look up "Incoterms" in Wikipedia.

http://www.iccwbo.org/incoterms/id3040/index.html This link takes you to the international definitions for all the 13 INCO terms. They define a range in responsibility and cost distribution between seller and buyer from EXW where Buyer is completely responsible from the production site to DDP where Seller is responsible for all cost all the way to the buyers dock. From the site; CIF; Cost, Insurance and Freight (to named destination), FOB; Free on Board (at named port)

I should amend my earlier answer. In many or most cases, the "free on board" point will be the factory location; in those cases "free on board" amounts to the same as "ex works." However, the the shipper can designate another free on board point. For instance, an inland factory in Spokane, WA, USA, might be willing to ship their goods to Seattle, WA, USA, the nearest seaport. If so, they could pay truck or rail freight to Seattle, and designate f.o.b. Seattle. The buyer would then be responsible for the ocean freight and other local delivery costs.

These terms can be mutually negotiated in a variety of ways. As Apothicus notes, careful consideration can place some of the costs into categories that may be exempt from customs duties.