What do EXW, FOB & CIF mean in Alibaba?

What is FOB (Free on board)?

Under FOB, the seller's responsible for loading the products at the port of shipment onto the buyer's chosen ship.

Additionally, all charges for stevedoring and terminal handling that are incurred during the loading of the cargo aboard the vessel are the seller's responsibility.

The buyer takes full responsibility and risk for the shipment of the goods to their destination after they are loaded onto the vessel.

This includes arranging for the shipment of the goods from the port of arrival to the intended location, managing all customs clearance processes and related paperwork, and covering any associated transportation expenses.

In other words, under FOB, the buyer bears the majority of the obligation and risk involved in the transaction and the seller's liability stops once the items are placed onto the vessel.

Example of how FOB works on Alibaba

Consider a scenario where a US customer wants to order 1,000 units of a product from a Chinese supplier.

The vendor offers FOB conditions, which specify that they will be in charge of loading the goods onto the buyer's chosen vessel at the Chinese port of export.

The buyer arranges for a freight forwarder to handle the transportation of the goods from the port of arrival in the United States to their final location.

The buyer pays the supplier for the cost of the goods, as well as any loading fees associated with loading the goods onto the vessel in China.

The buyer takes full responsibility and risk for the shipment of the goods to their destination after they are loaded onto the vessel.

This includes arranging for the items to be delivered from the port of arrival to their end destination, taking care of all customs clearance procedures and paperwork, and paying for any necessary transportation fees.

In summary, FOB terms on Alibaba serve to guarantee that both the buyer and seller understand their rights and obligations during the transaction by providing a clear and standardized framework for international trade.

Is FOB recommended when importing from China?

When is it recommended?

FOB is advised when importing from China:

• If the buyer wants to have more control over the transportation process but lacks the knowledge or resources to do it themselves.  As the supplier is in charge of loading the goods onto the buyer's specified vessel at the port of shipping in China, FOB terms offer the buyer extra assistance and protection during the transportation process.
• This can help to guarantee that the goods are securely loaded and transported without being damaged or lost.
• FOB terms are frequently used when the supplier and buyer are in separate nations because it can be difficult for the buyer to manage the transportation procedure on their own.
• For customers who want to make sure that the shipping procedure is conducted correctly but who lack the knowledge or capacity to handle it themselves, FOB can be a viable option in these circumstances.

When is it not recommended?

FOB is not advised when importing from China:

• If the customer does not have a trustworthy freight forwarder or logistics provider to handle the shipping of the products.  In these circumstances, the buyer may lack the knowledge or resources necessary to manage the shipping process independently and may be exposed to delays, damage, or loss during transit.
• FOB terms might be more complicated than other shipping terms, and the buyer may need to be well-versed in global commerce and transportation protocols.
• FOB terms might not be the ideal choice for customers trying to cut back on transportation expenses because it can be expensive to go from the port of arrival to the final location.

What is CIF (Cost, Insurance, and Freight)?

CIF, which stands for "Cost, Insurance, and Freight" is a shipping abbreviation used in global commerce. According to CIF conditions, the seller is in charge of making the necessary arrangements, covering the associated costs, and acquiring insurance to protect the products during transportation.

The seller is also in charge of managing all customs clearance processes and paperwork, as well as putting the products aboard the ship at the port of shipment.

The customer, however, is solely responsible and liable for transporting the goods to their destination once they have been placed onto the ship.

This includes arranging for the items to be delivered from the port of arrival to their final destination, taking care of all customs clearance procedures and paperwork, and paying for any necessary transportation fees.

In summary, CIF conditions on Alibaba give international trade a clear, defined framework and make sure that both the buyer and seller are aware of their obligations during the transaction.

Example of how CIF works on Alibaba

A Chinese supplier must provide 10,000 units of a product to a buyer in the United States.

The supplier offers CIF conditions, which mean that they will be in charge of handling all customs clearance processes and paperwork, as well as organizing and paying for the cost of transportation and insurance.

The vendor offers a $10 per unit, CIF Los Angeles, price. This means that the supplier will be in charge of arranging and paying for the cost of shipping the products to the port of Los Angeles as well as for the purchase of insurance to cover the items during transportation. The buyer will be required to pay $10 per unit.

The buyer will be in charge of handling all customs clearance procedures, paperwork, and arranging for transportation of the products from the port of arrival to their final destination after the goods arrive at the port of Los Angeles.

Is CIF recommended when importing from China?

When is it recommended?

When importing from China, CIF is advised:

• If the buyer wishes to clearly comprehend the whole cost of the items, including shipping and insurance.
• If the buyer wants to reduce their risk during shipping, CIF terms are also advised because the seller is responsible for acquiring insurance to protect the items during shipment.
• Because the seller is in charge of managing all of these procedures, CIF terms can be a smart choice for purchasers who are unfamiliar with China's transportation and customs clearance procedures.
• Purchasers who wish to clearly grasp the complete cost of the items and reduce their risk during transit may find that CIF terms are a good solution.

When is it not recommended?

CIF is not advised when importing from China:

• If the buyer wants more control over the products' insurance and transportation because the seller is responsible for arranging and obtaining insurance to protect the items during shipment, the buyer has less influence over the insurance coverage and might not be allowed to choose the insurance provider.
• CIF terms are sometimes more expensive than other shipping options because the seller is responsible for planning, organizing, and paying for the expense of transportation and insurance.
• CIF terms are also not recommended if the buyer is familiar with China's transportation and customs clearance procedures because the buyer could be able to handle these operations more efficiently and affordably than the seller.

Key differences between EXW, FOB, and CIF

In international trade, shipping phrases like EXW, FOB, and CIF are all used.

The main distinctions between these clauses relate to who is responsible for what during transit and when the risk of loss or damage to the goods passes from the seller to the buyer.

EXW provisions provide that the buyer is in charge of organizing and paying for shipping, insurance, and customs clearance while the seller is responsible for making the products available at their location.

Under FOB conditions, the buyer is in charge of organizing and paying for transportation, insurance, and customs clearance from the port of shipment, while the seller is in charge of bringing the goods to the port of shipping and loading them onto the vessel.

According to CIF rules, the buyer is in charge of unloading the goods and covering any additional costs at the port of destination, while the seller has the duty of organizing and paying for transportation, insurance, and customs clearance to the port of destination.

Simply put, the duties of the buyer and seller during transit and the moment at which the risk of loss or damage to the products is transferred from the seller to the buyer are the main distinctions between EXW, FOB, and CIF agreements.