FOB VS CFR (Incoterms)

Avatar Parisa Amiri January 24, 2021 0 Comments
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When you want to choose a shipping service from China to all over the world, it is better to know the terms used in this field. It will help you to choose the best one, and never have they confused you. 

As a person who lives in the 21th century, and has an easy access to the Internet, it is expected of you to get information in the field you are dealing with!

This article aims to talk about FOB VS CFR (Incoterms). After finishing this article, you will have enough information, and you will be a professional person in this field. 

What is incoterms?

Before we talk about FOB VS CFR, it is better to be familiar with incoterms. It is the abbreviation of International Commercial Terms, and it has been designed by “International Chamber of Commerce.” 

This term is used to distinguish costs and responsibilities between sellers and buyers.

This term is used to distinguish costs and responsibilities between sellers and buyers. This term also covers the matters such as 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.

Then, by this definition, we can say that this term is about all international trading rules for selling and transporting of goods. 

It is not important that you want to import or export, you need to refer to these rules. 

FOB VS CFR

For FOB VS CFR, at first, you should know these terms. FOB is the abbreviation for “Free on Board,” and CFR stands for “Cost and Freight.”

In the first term, the seller delivers goods on a specific board. All losses when goods are loading on the board are by the buyer. 

And in the second term, the seller delivers goods on the board. The seller should pay all the cost of freight transportation to the port. 

Now, it is time to talk about FOB VS CFR.

The difference between Tasks of Seller in FOB VS CFR

In both methods, some tasks are assigned to the seller, and they have some differences as the following:

  • The General task for both parties is that the seller should provide the inventory based on the contraction. The electronic document, if both accept, can be replaced for all documents. 
  • In both methods, the seller should provide all the needed licenses and customs affairs.
  • In FOB VS CFR, in the first term, the seller has no obligation to the buyer to conclude the contract of carriage; however, in the second one, the seller must conclude or prepare a contract for the carriage of goods from the agreed delivery point to any point in the said port. In both methods, the seller has no obligation to the buyer for the insurance contract.
  • In both methods, the shipper must deliver the goods on the ship designated by the buyer at the place of loading designated by him. The seller must deliver the goods on the date or within the deadline and according to the custom of the port.
  • In both methods, the shipper must pay for all risks of loss or damage to the goods until delivered.
  • In both methods, the shipper should provide the bill of loading at his own expense, except for some cases in the contract.  
  • In FOB VS CFR, for the delivery document, in FOB, the contents go here, but in CFR, the shipper has no obligation to the customer. 
  • In both methods, all costs for reviewing goods are by the shipper. 

The difference between Tasks of Buyer in FOB VS CFR

Like the previous section, in both methods, the buyer must do some tasks , and they have some differences as the following:

  • The buyer should pay the price of goods according to the contract, in both methods.
  • In FOB VS CFR, in FOB, the buyer, if he or she tends, can provide all licenses at his own expense, but in CFR, the buyer has an obligation to provide all licenses. 
  • In FOB VS CFR, in FOB, the buyer must pay the cost of goods transportation from the designated port; however, in the second term, the buyer has no obligation to the seller to conclude the contract of carriage.
  • In both methods, the buyer must deliver the goods when they are delivered.
  • In both methods, the buyer must pay all losses from the time of delivery of the goods.
  • In both methods, all the costs are by the buyer after receiving the goods except the Customs fee.
  • In FOB VS CFR, in FOB, the buyer must provide the seller with sufficient information about the ship’s name, point of loading, and, if necessary, delivery time within the agreed timeframe; however, in the second one, the buyer, when she or he has the right to determine the time of goods transportation or deliver them at a specific destination, must give all information to the seller. 

Who must do the clearance of goods in FOB and CFR?

In both methods, depending on the case, requires the seller to clear the goods for export. However, the seller has no obligation to do clearance the goods for import, pay any import duties, or perform any customs formalities for import.

Where is the international shipping method FOB not suitable?

The FOB is not appropriate when the goods are delivered to the carrier before being loaded on the ship, for example, goods loaded in a container, which is usually delivered at the terminal. In such cases, the term FCA should be used.

Where is the international shipping method CFR not suitable?

The CFR is not appropriate when 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 CPT Incoterm should be used.

DDPCH

Dear customers

If you need a special rate and competitive offer for Door to Door Rail and Trucking service from China to European countries, please contact our Sale Team.

Does CFR include customs clearance?

CFR includes import customs duty which is borne by the buyer.

Customs Clearance Cost Saudi Arabia | Full Guide for Importers 2020
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