Read FOB, CIF and CFR
Now the international general trade methods are generally divided into FOB (FOB), CIF (CIF) and bonded area price (CIP). Free on board (FOB) means that the seller has the contractual right to demand payment for the goods after they have crossed the ship's rail. That is, in the case of FOB, as soon as your goods leave the dock, you're all right (are you? See the case at the end of the article). On a CIF basis, you have to deliver the goods safely to a designated port before you can enjoy these rights. The seller shall bear the intermediate charges.
For goods declared on CIF basis, tax exemption and tax credit shall be calculated according to the following formula: tax exemption and tax credit = (transaction value - sea freight - insurance premium - foreign Banks and other deductions) × rebate rate
The terms FOB,CIF and CFR first appeared in the Warsaw-Oxford Rules of 1932. The rules have been amended several times, and finally incoterms 1990 as the most general and authoritative publication. In the domestic three terms are now standardized called price terms. On deck delivery, the seller shall bear the costs and risks before the goods cross the ship's rail, and then the costs and risks shall be transferred to the buyer. Of course, if the goods are to be allowed to cross the ship's rail, the seller shall be responsible for the completion of export clearance procedures. The seller shall be responsible for the cost of transporting the goods to the designated port of destination. The risk shall be that the goods cross the ship's rail at the port of loading. The previous risk shall belong to the seller and the subsequent risk to the buyer. The Seller shall bear the costs and risks during the period when the goods are shipped to the port of destination, in which the risks covered by the seller shall be as little as the minimum.
Three terms in case of container transportation or roll-on roll-off transportation, rail has no actual meaning, FOB terms can be changed to FCA (freecarrier), CFR terms can be changed to CPT (cost&freightpaidtodestinationpoint), CIF terms can be changed to CIP (costinsurencefreightpaidtodestinationpoint). The export clearance of the three clauses shall be borne by the seller, while the import clearance shall be borne by the buyer.
According to the customary practice of international insurance market, the insured amount of export goods is calculated by CIF price plus 10%, and this 10% increase is called insurance premium rate or insurance premium rate, which is the cost and expected profit that the buyer pays for this transaction. The formula that insurance amount calculates is: insurance amount =CIF price * (1+ cast an insurance to add rate) take CIF as the computation base of insurance amount, show not only goods itself, and include freight and insurance premium to be cast as the mark of insurance and cast an insurance, produce a loss is to obtain compensation. Therefore, to insure the goods under the CFR/FOB contract, it is necessary to first quote the CFR/FOB price at home to calculate the insurance amount. The calculation formula is: convert CFR price to CIF price: CIF=CFR/[1-(1+ plus rate) * sum of the premium rate], and convert FOB price to CIF price: CIF=(FOB+F)/[1-(1+ plus rate) * sum of the premium rate].
I. Commission calculation Formula:
1 with commission price = net price + unit commission
The unit commission = price including commission × commission rate
(3) Price including commission = net price + (price including commission × commission rate) = net price/(1- commission rate)
Ii. Discount calculation Formula:
(1) reduced price = original price × (1- discount rate)
The amount of discount = original price × discount rate
Three trade terms and their conversion formulas between the commission prices
1. Convert FOB prices into other prices
(1) the CFR = "+ F
(2) CFRC=FOB+F/(1-Commission rate)
(3) CIF=FOB+F/(1-premium rate × insurance premium) (Insurance premium =1+ insurance premium rate)
(4) CIFC=FOB+F/(1- insurance rate × insurance premium - commission rate)
2. Convert CFR to other prices
(1) FOB= CFR-f
(2) CFRC= CFR/(1- commission rate)
(3) CIF=CFR/(1- premium rate × insurance premium)
(4) CIFC= CFR/(1- insurance rate × insurance premium - commission rate)
3. Convert the CFRC price into other prices
(1) FOB=[CFRC× (1-commission rate)] -f
(2) CFR=CFRC× (1- commission rate)
(3) CIF=[CFRC× (1- commission rate)] / (1- premium rate × Insurance premium)
(4) CIFC= [CFRC× (1-commission rate)] / (1-Insurance rate × Insurance premium - Commission rate)
Convert the prices on CIF basis into other prices
(1) FOB= CIF× (1- insurance rate × insurance premium) -f
(2) CFR= CIF× (1- insurance rate × insurance premium)
(3) CFRC= [CIF× (1- premium rate × Insurance Premium)] / (1- Commission rate)
5. Convert CIFC price into other prices
(1) FOB= CIFC× (1- insurance rate × insurance premium - commission rate) -f
(2) CFR= CIFC × (1- insurance rate × insurance premium - commission rate)
(3) CFRC=[CIFC × (1- premium rate × Insurance premium - Commission rate)] / (1- Commission rate)
Iv. Price calculation Formula:
1. Cost accounting formula
(1) Actual purchase cost = tax-inclusive cost (purchase cost) - amount of export tax rebate
(2) Amount of export tax rebate = tax-inclusive cost × export tax rebate rate ÷ (1+ VALUE-ADDED tax rate)
2. Freight calculation formula
1 bulk freight; Basic freight + surcharge
(2) Container freight; The same as the freight for LCL and groceries, the FREIGHT for FCL = box rate + surcharge
3. Insurance premium accounting formula
(1) Insurance premium = amount of insurance × premium rate
(2) Amount of insurance = CIF price × (1+ insurance premium rate)
The premium rate is usually 10% and the insurance amount is calculated on the basis of CIF(CIP) price or invoice value
4. Profit accounting formula
(1) Sales price = actual cost + profit = actual cost + actual cost × profit margin
The profit = actual cost x profit margin
5. Profit and loss accounting formula
Export total cost = export carpotherb potherb potherb mustard gas gong building commodity purchase price + domestic expenses + taxes + profits
Net income from export sales of foreign exchange (USD) =FOB total price (USD) =CIF total price - foreign freight - insurance (USD)
Net income from export sales in RMB = foreign exchange from export sales in US dollars net income =FOB total price (US dollars) × Bank purchase price =[CIF total price - foreign freight - insurance premium (US dollars)] × Bank purchase price
Export profit and loss ratio = (export profit and loss/total export cost) ×100%
Export profit and loss = net export income in RMB - total export cost
Exchange cost of export commodities = total export cost (RMB)/net foreign exchange income from export sales (USD)
Export earned exchange rate = (net export foreign exchange income of finished products - foreign exchange cost of raw materials)/foreign exchange cost of raw materials x 100%
FOB--Free on Board (cost price)
Also called free on board (named port of shipment) clause. This means that the seller fulfills his obligation of delivery when the goods cross the ship's rail at the named port of shipment. This means that the Buyer shall bear all expenses and risks of loss and damage of the goods from this time on. That is to say, when the goods cross the ship's rail at the named port of shipment, the major risks and rewards of ownership of the goods pass to the buyer.
(1) Division of the basic obligations of the buyer and the seller
According to the international Chamber of Commerce's interpretation of FOB, the basic obligations undertaken by the buyer and the seller can be summarized as follows:
1. Obligations of seller
(1) Deliver the goods to the Buyer in the customary manner at the port of shipment within the time or time specified in the Contract
Dispatch the ship and inform the buyer in time.
(2) At its own risk and expense, obtain export license or other official approval documents. To go through all the customs formalities necessary for the export of goods when necessary.
(3) Bear all expenses and risks until the goods pass over the ship's rail at the port of shipment;
(4) A normal document certifying that the goods have been delivered to the ship at its own expense. If the buyer and the seller agree to communicate electronically, all documents may be replaced by electronic data interchange (EDI) information of equal force.
2. Buyer's obligations
(1) Negative risks and costs of obtaining import licenses or other officially approved documents. To complete all customs formalities for the importation of goods and transit through another country when necessary, and to pay the relevant fees and transit fees;
(2) Charter the vessel or book the space, pay the freight and give the Seller full notice of the name of the vessel, the place of shipment and the required time of delivery;
(3) to bear all expenses and risks after the goods have crossed the ship's rail at the port of shipment;
(4) Accept the relevant documents provided by the seller, take delivery of the goods, and make payment according to the contract
(II) Differences in THE American interpretation of FOB
It is worth noting that the interpretation and application of FOB in the revised Definition of Foreign Trade of the United States of America in 1941 are obviously different from the general international interpretation and application, which are mainly reflected in the following aspects:
The term "FOB" is generally interpreted as "delivery on a certain means of transport at a certain place", which has a wide range of application. Therefore, when negotiating an import contract with the United States on FOB, in addition to the name of the port of shipment, the word "Vessel" must be added after THE word "FOB". If it is defined as "FOB San Francisco" without "Vessel", the seller is only responsible for transporting the goods to any place within the city of San Francisco, but not for transporting the goods to the port of San Francisco and delivering them to the ship. As Canada and other countries also cite the practice of the United States, so, when signing a FOB import contract with Canadian and other countries, should also pay attention to the above issue.
2. In terms of risk division, it is not bounded by the port of shipment but by the ship's hold, that is, all loss and damage occurred until the goods are loaded to the ship's hold at the seller's expense.
3. In terms of expense burden, it is stipulated that the buyer should pay for the seller's assistance in providing the export documents as well as the export tax and other expenses arising from the export.
A variant of the FOB term
In the case of a FOB transaction, the seller shall be responsible for all expenses incurred prior to the loading of the goods on board the ship. But because the term older, when used in various countries and regions for clear explanation of the concept of "on board" is not regulated, in the process of loading involves all the specific costs, such as the cost of the goods shipped to the boat, lifting the cost of the ship stowage peace class fees, etc., who burden, custom or practice of all countries is not entirely consistent. If liner shipping is adopted, the vessel shall load and unload the vessel, and the loading and unloading expenses shall be included in the liner freight, which shall naturally be borne by the buyer in charge of chartering the vessel; And if the use of voyage charter transport, the ship generally does not bear the cost of loading and unloading. This makes it clear who should bear the costs of the shipment. In order to explain the burden of shipping costs, both parties often add additional conditions after the FOB term, which forms the FOB term, mainly including the following:
(1) FOB Liner Terms
This deformation means that the shipping cost is treated in accordance with the liner's practice, that is, borne by the ship or the buyer. Therefore, by using this deformation, the seller does not bear the relevant costs of shipment.
(2) FOB Under Tackle
Means that the Seller shall deliver the goods at the buyer's expense within the reach of the hook of the vessel nominated by the Buyer, and the lifting, such as the hold and all other expenses shall be borne by the Buyer.
I wanted her to know that I owed her a debt.
Means that the seller is responsible for loading the goods onto the ship's hold and paying the shipping charges, including handling charges. The term "handling fee" refers to the expenses incurred in arranging and arranging the cargo after it has been carried out.
(4) the FOB Trimmed (FOB) Trimmed,
Means that the seller is responsible for loading the goods onto the ship's hold and bearing the shipping charges including trimming charges. Trimming charge means the charge for levelling the bulk cargo loaded into the hold.
In many of the standard contract, to indicate that shall be borne by the seller including freight stowage fee for peace, the shipping charge, often using FOBST (FOB Stowed and Trimmed).
The above FOB deformation is only to show who bears the shipping costs and does not change the FOB delivery point and the boundaries of risk division
CIF(Cost, insurance and freight)
1. Also known as c&C (designation of port of destination) clause. In addition to the same obligation under the CFR, the seller must insure the goods against the risk of loss of or damage to the goods borne by the buyer during transit. The seller signs the insurance contract and pays the premium. The seller's liability passes to the buyer when the goods cross the ship's rail at the port of destination. That is to say, the main risks and rewards of ownership of the goods pass to the buyer when the goods cross the ship's rail at the named port of destination.
This price term is customarily referred to as "CIF". In accordance with the general interpretation of international trade practice, the obligations of the seller and the buyer on a CIF basis are as follows:
(1) Responsible for charteringor booking space, loading the goods on board and paying the freight to the port of destination within the time limit stipulated in the contract and notifying the buyer after loading;
(2) Be responsible for all expenses and risks of the goods before they are loaded onto the ship;
(3) Responsible for handling insurance and paying insurance premiums;
(4) To handle export formalities and provide certificates issued in person by the government of the exporting country or relevant parties;
(5) Responsible for providing relevant shipping documents, including official insurance documents.
(1) Bear all expenses and risks incurred after loading the goods on board;
(2) Accept the relevant shipping documents provided by the seller and make payment according to the contract;
(3) Handle the import procedures of receiving goods at the port of destination.
3. For goods declared on CIF basis, tax exemption and tax credit shall be calculated according to the following formula: tax exemption and tax credit = (transaction value - sea freight - insurance premium - foreign Banks and other deductions) × tax refund rate
Cost and freight (CFR)
1. Also called Cost and Freight (named Port of destination) clause. This means that the Buyer must pay the cost and freight necessary to ship the goods to the named port of destination, but the risk of loss or damage after the goods are delivered on board, and any additional costs arising therefrom, the principal risk and remuneration in the Seller's title passes to the buyer as soon as the goods cross the ship's rail at the port of shipment.
2. Cost and freight (COST and freight) means that the Seller is responsible for charteringor booking space and bears all expenses and risks until the goods are over the ship's rail at the port of shipment and delivers the goods to the ship to the named port of destination within the time of shipment stipulated in the contract, and pays the freight.
3. The difference between CFR and CIF is that the seller of a CFR contract is not responsible for handling the insurance procedures and paying the insurance premium, and does not provide the insurance policy. In addition, the CFR and CIF contracts are divided on the same basis as the obligations of the buyer and seller.
In concluding a contract in CFR terms, particular attention should be paid to the issue of advice of shipment. According to the international trade practice, the seller of the FOB, CIF or CFR contract must give the buyer a shipping notice in time after the shipment of the goods. However, in the CFR contract, it is particularly important for the seller to give timely notice of shipment, as it concerns whether the buyer can obtain timely insurance for the imported goods. Some national laws, such as the British law "> for sale of goods", stipulate that if the seller fails to give the buyer a shipping notice in order for the buyer to take out insurance on the goods, then the risk of the goods being transported by sea shall be deemed to be borne by the seller. Therefore, in export trade, as the seller of CFR contract, we usually use telex and other fast communication methods to give shipping advice as soon as the name of stawage vessel is known. Some letters of credit open abroad stipulate that beneficiary (seller) must provide copy of cable or telex advice of shipment. The date of the cable or telex advice of shipment must usually be not later than the date of the bill of lading concerned.
The CFR term is basically the same as the CIF term, except that the insurance shall be covered by the buyer at his own expense.
For FOB terms, the buyer designated overseas freight forwarders should carefully consider whether to accept. In recent years, the buyer often colludes with the freight forwarder, requiring the ship to release the goods without a single, resulting in the seller's money and goods empty things.
Share a case
A fujian arts and crafts export company (hereinafter referred to as the seller) signed a trade contract with an American company (hereinafter referred to as the buyer) for the Fujian company to export arts and crafts to an American company on a FOB basis.
The seller shall book the space and deliver the goods to The Fujian forwarder A according to the buyer's instructions, and the forwarder A shall deliver the full set of original bill of lading to the seller, and the bill of lading shall be issued by B Company.
After the seller gets the bill of lading according to the agreement with the copy of the bill of lading to buyers for payment, but until the arrival of the goods at the port of destination did not see the consignee for payment. Although the bill of lading is still in my hand, but the payment has not been received, so the seller continues to urge.
However, later, the seller learned that the goods have been taken away, the buyer will not pay! B/L in hand, how can the goods be taken away?
Then the seller litigation to the court, the responsibility of the carrier. The court ruled that carrier B company was liable for compensation. But, the question is, does the carrier have enough capacity to compensate? At present, the enterprise that dares to release goods without single is such normally: bag company or be far abroad; Want to let its assume responsibility, not easy!
That after all, no single release of goods is how to produce?
FOB means the buyer designates the carrier (usually the foreign freight forwarder and its agent in China), and the buyer controls the transport. Freight forwarders often listen to buyers, or even directly controlled by buyers; Release goods without a single usually occurs in this case!
After obtaining the OCEAN B/L from the shipping company, the forwarder can directly send it to the agent abroad. The foreign forwarder can pick up the goods from the shipping company after receiving the OCEAN B/L. Whether foreign forwarders take back the forwarders' bill (HOUSE B/L) when they deliver the goods to the actual consignee is another matter. Once the foreign forwarder in the delivery of the goods to the consignee does not require the consignee to return the original bill of lading, then the bill of lading in the hands of the shipper in a sense can be identified as waste paper.
Which method of delivery is safer to adopt?
Facts have proved that in our export business, as the seller, according to the specific situation of the transaction, it is very necessary to carefully choose the appropriate trade terms to prevent the risk of foreign exchange collection and improve economic benefits. Let me tell you a few things you should pay attention to when choosing trade terms.
In general, it is more advantageous to use CIF or CFR terms in export business than FOB terms. Because, under CIF condition, the three contracts involved in the international sale of goods (sales contract, transport contract and insurance contract) by the seller as its parties, he can according to the situation as a whole arrangement for the preparation of goods, shipping, insurance and other matters, to ensure the mutual connection of the operation process.
In addition, it is conducive to the development of China's shipping industry and insurance industry, and increase revenue from service trade. Of course, this also is not absolute, should consider oneself to arrange transportation to have difficulty above all according to the specific circumstance of the commodity that trade, and whether be economical wait for a factor.
The risk of FOB also lies in that, if the designated freight forwarder cannot book the space directly, but book the space through other professional routes, then it has no real control over the real right in transportation, which leads to problems in transportation that cannot be solved in time.
Many sellers may say, for this FOB shipment, we are not responsible for the shipment, we have nothing to do with it, I don't need to worry about it. There is something wrong with this point of view, because when the freight transportation route is a multiple choice, when the transportation time is prolonged, what increases is the increase of the capital circulation cycle of the manufacturer. For example, for the same trip to South America, some ships take about 60 days to sail, while others only take half the time, which will delay the time of receiving payment from customers.
Sometimes, in order to reduce the transportation cost, the consignee would not hesitate to designate a ship with a long voyage, which is understandable. Of course, some manufacturers are willing to take a ship with a long voyage due to storage reasons, so as to reduce the storage cost.
If the value of the goods is small, then nothing can be seen. If the value of the goods is large, the customer's slow payment speed will lead to the uncertainty of the exchange rate issue. I think the manufacturers have a deep understanding, the current exchange rate, changes every day, the exchange loss problem, we need to pay attention to.
If you have to use FOB terms:
1. The time when the buyer sends the ship to the port for loading should be clearly stipulated in the contract, so as to avoid the occurrence of delayed shipment due to the fact that the goods are ready and the ship does not arrive.
2. Increase the proportion of deposit to reduce the probability of customer backwater. When shipping is too difficult for customers, be sure to stick to the bottom line when it comes to payment terms, preferring to make little or no money rather than risk losing money.
3. In a trade contract, the buyer and the seller agree that the forwarder company is not limited to a specific one. If the carrier and the bill of lading are not filed with the MOTC, you have to be careful. (The documented bill of lading and the carrier are required to pay security, which makes the bill of lading relatively safe.) If the buyer has to be paranoid about his opinion, the seller has to consider risk. Accept well-known shipping company and insist on using shipping company bill of lading, try to avoid using designated overseas freight forwarders and bills of lading issued by them. At the same time, the owner shall require our our forwarder outside agent at the port of shipment formalities issue the letter of guarantee, commitment is specified overseas forwarder to arrange the transport of the goods at the port of destination must be under l/c by bank transfer after the original bill of lading release cargo, otherwise will bear the liability for shipment release without collection bill of lading only in this way, once appear, the situation of the shipment release without collection bill of lading, in order to have a basis for the claim.
4. In the case of FOB export, it must be specified in the contract that the shipper shall entrust the forwarder or NVOCC to book space with the shipping company, and the right of booking space cannot be given to the buyer, because the obligation of booking space and delivery is unified. The name of shipper (seller) must be entered in the column of Shipper in bill of lading. The consignor has the right of entrustment booking, also has the control of the goods. If the buyer has good credit and has the requirement to resell the goods in transit, the buyer can also be used as the shipper. If the buyer's credit is not known, it is better to take the seller as the shipper for the sake of safety.
5. It is also advisable to use a consignee's order Bill of lading in issuing an L/C, which gives the bank tight control over the right of shipment and prevents the risk of release without documents.
6. Invest in Sinosure to hedge risks. Before the investment, we should know about the countries and regions where they are not insured and the blacklisted customers, and learn more about the cases rejected by Sinosure, so as to avoid further damage.
What should be done once the goods are released without documents?
Except for sinosure, nothing else is available. Online advice including find embassies, international lawsuit, various blacklist, looking for a Courier company, not to mention the customer is professional fraud, will a wily rabbit has three burrows have several companies, do you have any criminal background, in these threats are care, just to go overseas to follow up to avoid costly, burn out, then don't have to do the business.
Property right is the most important thing in foreign trade, don't bury your head in bargaining all day and fall into the trap set by others. Again, prevention is better than remedy.