One of the significant advantages of the 21st century is that everyone from everywhere has access to the Internet. Then, it makes the process of gathering information very easy.
Providing products for every business is a significant challenge, and after that, shipping will create many challenges for businessmen and businesswomen.
Knowing the rules and the terms used in this part will help them choose the best freight forwarding way.
This article aims to talk about “CIF VS EXW.” After finishing this article, you will have enough information.
What are incoterms?
Before we talk about CIF VS EXW, it is better to be familiar with incoterms. It is the abbreviation of “International Commercial Terms”, and the “International Chamber of Commerce” has designed it.
This term is used to distinguish costs and responsibilities between sellers and buyers. This term also covers matters such as the following:
- Transportation of goods
- Clearance of goods
- Importing and exporting of goods
- Who is responsible for payment
- Who is responsible for the risk of moving and transferring goods at different stages
And other matters related to freight forwarding from sellers to buyers.
By this definition, we can say that this term is about all international trading rules for selling and transporting goods.
When you want to import or export; you need to refer to these rules.
CIF VS EXW
For CIF VS EXW (Incoterms), at first, you should know these terms.
CIF is the abbreviation for “Cost, Insurance and Freight.”
EXW is as follows:
- The Seller must provide the goods to the buyer at his workplace or another designated place.
- The Seller’s delivery of the goods does not require loading it on the means of transport, nor is clearance of the goods for export if this necessary.
- The parties are well aware that they must specify the place of delivery of the goods as clearly as possible because all costs and risks up to that point are the responsibility of the Seller.
Now, it is time to talk about CIF VS EXW.
In CIF VS EXW, we, firstly, talk about the CIF term. It may come to the mind that what does the price of CIF mean?!
The exact answer to this question is, “The price paid by the buyer in the port is called the CIF price.”
CIF price is calculated in this way “value of goods + customs cost + shipping to port + THC + bill of lading + port costs + insurance cost + shipping cost to the destination port.”
As you know, the Seller and the buyer have some tasks that may differ in some ways in CIF VS EXW.
In CIF, The Seller concludes an insurance contract for the buyer to cover the risk of loss or damage to the goods during transport.
The buyer should note that the Seller is only required to provide the minimum insurance coverage under the term CIF.
If the buyer wants more insurance coverage, he must explicitly agree with the Seller to provide the excess insurance.
When the terms CFR, CIP, CPT, or CIF are used, the Seller’s duty ends with delivering the goods to the designated carrier in the specified way contracted before. It is not about when the goods arrive at the destination.
The Seller’s general duties are that he/she must prepare the goods, inventory and any other documents under the contract.
And General duties of the buyer is that he/ she must pay the price of the goods in the order provided in the sales contract.
An insurance contract in CIF
An insurance contract is essential in CIF VS EXW. In CIF, this contract is divided into two parts, as follows:
A) Shipping contract
The shipper or the Seller must conclude or prepare a contract for the carriage of goods from the agreed delivery point, if present at the place of delivery to the designated destination or, if approved, to any point in the said port.
The contract of carriage must be arranged according to the usual conditions at the Seller‘s expense, and the carriage must be of the regular routes used by ship.
B) Insurance contract
At its own expense, the Consignee must provide cargo in accordance with the minimum insurance coverage, provided by the Institute and Cargo Insurance (London Insurers Institute), or any insurance coverage with similar conditions.
The insurance contract must be concluded by the insurer or a reputable (reputable) insurance company so that the buyer or any other person who has an insurance interest in the goods can claim damages directly from the insurer.
Where is not CIF appropriate?
The term CIF in international shipping methods is not appropriate in cases where the goods are delivered to the carrier at a point other than the ship’s deck, for example, goods loaded in a container, which is usually delivered at the terminal. In such cases, the term CIP is used.
If agreed upon by the parties, the electronic equivalent of documents can replace all documents.
Now, you have enough information about CIF, and for completing the CIF VS EXW discussion, it is time to talk about EXW.
The general task in for the buyer in EXW is as the following:
- The buyer must pay the price of the goods in the order specified in the contract of sale.
- The buyer must obtain at her own expense and, if necessary, any import and export licenses or other official permits, including security clearances, and perform all customs formalities to export goods.
- The buyer accepts all risks arising from the loss or damage to the goods from when the goods are delivered.
- The buyer must pay all costs related to the goods from the time of delivery and any additional costs resulting from his failure to deliver the goods.
- The buyer must pay all duties, taxes, and other costs and expenses incurring customs formalities for the export of goods, as the case may be
- The buyer shall reimburse all costs and expenses incurred by the Seller for assistance.
- The buyer must pay for any pre-shipment inspections, including inspections ordered by the issuing country’s authorities.
In the CIF VS EXW, the task of the Seller is essential, that they are as following:
- The Seller must prepare the goods and the business list under the sales contract and provide any other proof of compliance that may be required by the contract.
- The Seller must assist the buyer in obtaining any export license or other official permits as are necessary for the export of the goods, depending on the case, at the buyer’s request, risk, and cost.
- The Seller must deliver the goods at the agreed point and if there is no such point, at the designated place, without loading on the means of transport.
An insurance contract in EXW
An insurance contract is essential in CIF VS EXW. In EXW, it is as following:
A) Shipping contract
The buyer has no obligation to the Seller to conclude the contract of carriage. And the Seller has no obligation to the buyer to terminate the contract of carriage.
B) Insurance contract
The buyer has no obligation to the Seller to conclude the insurance contract. And the Seller has no obligation to the buyer to complete the insurance contract. However, the seller may be willing to provide the buyer with the information he needs to terminate the insurance contract.
In this article, we tried to provide all vital information for you to know CIF VS EXW. For more and detailed information, you can consult with professionals in this field.
If you need an impressive rate and competitive offer for Door to Door Rail and Trucking service from China to European countries, please contact our Sale Team.
CIF or CRF import freight terms are more expensive than EX works or FOB.