Assignment on

Explanation of CIF and FOB and their differences:

Analysis under International Trade Law

Course Title: International Trade Law

Course Code: LLBH 307

Prepared for Prepared by

Course Teacher’s Name: Dr. Parvez Ahmed Student’s Name: Sadia Afrin

Teacher’s Post: Chairperson& Associate Professor Student’s ID: 191011054(2)

Department of Law Department of Law

Green University of Bangladesh Green University of Bangladesh

Date of Submission: 25/03/2021

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Table of Contents

Introductory Issue ....................................................................................................................... 3

1.1Introduction ....................................................................................................................... 3
1.2 Objectives of the Study ......................................................................................................... 3
1.3 Methodology of the study .................................................................................................... 3
1.4 Limitations of the study ........................................................................................................ 3
2.1Meaning ................................................................................................................................. 4
2.2Definition of Scholar: ............................................................................................................. 4
2.3Definition of international trade............................................................................................ 4
3.1Definition of FOB:................................................................................................................... 5
3.2Definition of CIF : ................................................................................................................... 5
3.2Definition Cost, Insurance, and Freight: ................................................................................ 6
Means.......................................................................................................................................... 6
Who pays the freight ........................................................................................................... 6
Conclusion ................................................................................................................................... 7
Bibliography ................................................................................................................................ 8

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Introductory Issue
1.1Introduction
In the case of International Trade under CIF and FOB is most popular export and import
contract. Both have some differences about rights and duties. Then now I will disuses about CIF
and FOB differences under international Trade. CIF and FOB mainly differ in who assumes
accountability for the goods for the period of transport. In CIF contracts, insurance and other
costs are unspecified by the seller, with legal responsibility and costs connected with successful
shipment paid by the seller up in anticipation of the goods are received by the buyer. The farm
duties of the seller take in transporting the goods to the nearest port, loading them on a vessel
and paying for the insurance and freight.

1.2 Objectives of the Study

This assignment has been conducted with the following objectives;

1. To develop an understanding International Trade under CIF and FOB export and import
contract.

2. Drawing its problems and solution.

3. To analyze the difference between CIF and FOB.

1.3 Methodology of the study

The methods and techniques of data collection are the key mechanism in an obligation. The
method must be steady with the objectives of the study that can cover the whole area of
attention. In this study only secondary data have been composed. Secondary information have
been collected from concerned books, journals, periodicals, other materials and teacher
lectures.

1.4 Limitations of the study

No assignment is free from certain limitations. Following are the limitations:

1. This study has been lead in a specific ground especially in books, journals, periodicals, other
materials, and teacher lectures.

2. This study has been able within a short time. For such a time constraint it is not possible to
collect detailed data and information on the issue in the current pandemic situation in the
world.

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2.1Meaning
➢ International trade is the buy and sell of goods and services between countries.
➢ These types of trade gives rise to a globe economy, in which prices, or provide and
demand, have an effect on and are affected by global procedures.
➢ IN BUSINESS point of view “The trade of freight or services by the side of international
borders. This type of trade allows for a superior opposition and more competitive
pricing in the market. International trade is the substitute of capital, goods, and services
from corner to corner international borders or territories. In the largest part countries,
such trade represents a considerable share of gross domestic product (GDP).

2.2Definition of Scholar:
According to Wasserman and Haltman, “international trade consists of transaction residents of
different countries.”

According to Anatol Marad, “International trade is a trade between nations.”

According to Edgeworth, “International trade means trade between nations.”

2.3Definition of international trade

International trade, moreover known as world trade, foreign trade or overseas trade, is the
reasonable and deliberate replace of goods and services from corner to corner national
boundaries. It concerns trade operations of both import and export and includes the pay for
and sale of both in evidence and imperceptible goods. Firms must become accustomed to
uncontrollable surroundings of international marketing from side to side adjusting the
marketing mix (manufactured goods price, promotion, and distribution).of both visible and
invisible goods, Firms must adapt to uncontrollable surroundings of international marketing by
adjusting the marketing mix (product, price, promotion, and distribution).

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3.1Definition of FOB:
Free on Board (FOB) is a shipment term used to point toward whether the seller or the buyer is
accountable for goods that are spoiled or destroyed for the duration of shipping. "FOB shipping
point" or "FOB origin" means the buyer is at risk and takes ownership of goods previously the
seller ships the produce. Historically, FOB was used only to refer to goods transported by ship;
the term has since been long-drawn-out to contain all types of transport.

On behalf of accounting purposes, the seller should evidence a sale at the spot of departure
from its shipping dock. "FOB origin" means the buyer pays the shipping cost from the factory or
warehouse and gains ownership of the goods as soon as it foliage its spot of origin.

"FOB destination" means the seller retains the risk of defeat in anticipation of the goods get to
the buyer.

3.2Definition of CIF :
Cost, insurance, and freight (CIF) is an expenditure paid by a seller to cover up the costs,
insurance, and freight of a buyer's organize at the same time as it is in transit. The goods are
exported to a port named in the sales contract. Until the goods are completely loaded on top of
a transport ship, the seller bears the costs of any loss or damage to the produce.
Supplementary, if the product requires extra customs duties, export paperwork, or inspections
or rerouting, the seller is obliged to cover these operating costs. Once the freight loads, the
buyer becomes accountable for all additional costs.1

1
ecvietnam.com/en/operations/news/what-is-cif-what-is-fob-difference-between-cif-and-fob-108.html

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 3.2Definition Cost, Insurance, and Freight:

NO FOB CIF
1. Free on Board (FOB) is the most Cost, Insurance and Freight (CIF) is a
shipping contract under which the
generally used shipping contract in item seller is accountable for the cost of the
of clothing exporting. As the name goods in transportation, provided that
indicates, the seller holds the insurance with the buyer's name as
Means the recipient. Risk passes to the buyer
accountability of goods in anticipation
as almost immediately as the cargo is
of it is loaded on board of the on board of the ship/aircraft.
ship/aircraft selected by the buyer.
Accountability shifts to the buyer on
one circumstance the cargo is on board
the ship/aircraft.

2. Who pays FOB is a term of sale under which the Seller is accountable for paying freight
the freight company quotation marks the price charges to progress goods to the
together with all charges for insertion purpose of buyer’s option. From the
goods on board of a ship or aircraft. It is point of delivery at the purpose, the
also called freight. The sellers also have buyer is accountable for unloading
to clear goods for sell overseas. 2 charges and shipping cost to a final
destination.
3. Why Use FOB FOB is usually the majority commercial If area buyers, might choose to use CIF
and CIF? alternative for buyers. Buyers don’t because of the convenience. Buyer
have to pay a high fee to their sellers as doesn’t have to handle any risks,
they might with CIF. Buyers also have claims, or freight concern in
additional be in charge of over the transportation. This is in particular
freight timing and cost, because they important for new importers who
are intelligent to want their freight aren’t sure of the details of shipping in
forwarder. If no matter which happens a foreign country. Many importers will
to the goods, they hold the title and also use CIF if they are transport a
accountability, so they can improve small group of cargo, as the cost of
right of entry information and solve insurance for diminutive volumes may
concerns. in point of fact be higher than the fees
exciting by sellers.

2
https://techpacker.com/blog/manufacturing/difference-between-fob-and-cif/

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4. Why Not Use New importers are not recommended CIF tends to be a more expensive
FOB? to use FOB because buyers must retain agreement than FOB for buyers.
more liability for the goods while in Often, sellers will invoice buyers for
shipment. New buyers who don’t yet their costs of shipping and insurance.
understand the intricacies of overseas They may even add in additional fees
shipments can make mistakes that can to make a larger profit. In this way,
have severe penalties. buyers end up paying more for
New buyers might choose a CIF contract shipping than they would with a FOB
until they better understand the agreement.
importation process.
5. The Bottom- The most important difference between In most cases, we suggest FOB for
line FOB and CIF is when responsibility and buyers and CIF for sellers. FOB saves
ownership transport. In most cases of buyers money and provides control,
FOB, accountability and identify but CIF helps sellers have superior
ownership shifts when the shipment revenue. However, we advise that
leaves the point of source. With CIF, new buyers use CIF as they get
accountability transfers to the buyer comfortable to the significance
when the goods get to the point of procedure.3
destination.

Conclusion
CIF and FOB contracts are the majority significant contracts in the meadow of International
Trade. Both of contacts are appearance each other. However, CIF contract has a very
considerable dissimilarity from FOB contract. Generally, under the CIF contract, the parties
have to agreement with release of documents and not real substantial delivery of goods by the
seller. As a subject of detail, FOB contract is known as a flexible mechanism which could be
sensible to International Trade companies while on the other hand, CIF contract is in order
much more than FOB contracts by companies in the meadow of International Trade.

3
https://www.redwoodlogistics.com/difference-fob-
cif/#:~:text=The%20major%20difference%20between%20FOB,reach%20the%20point%20of%20destination.

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Bibliography
➢ ecvietnam.com/en/operations/news/what-is-cif-what-is-fob-difference-between-cif-
and-fob-108.html

➢ https://techpacker.com/blog/manufacturing/difference-between-fob-and-cif/

➢ https://www.redwoodlogistics.com/difference-fob
cif/#:~:text=The%20major%20difference%20between%20FOB,reach%20the%20point%2
0of%20destination.

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