It is clearer with CIF, as the seller agrees to purchase marine insurance to cover the journey up to the seaport of destination. Alternatively, ownership may be transferred some time after delivery, if the goods are procured on credit. The seller's responsibilities include: The seller must deliver the goods to the ship within the agreed-upon timeframe. In most cases, the seller's obligation ends once cargo loading is complete. Under CIF terms, the seller is responsible for specific protections for an order. The carriage of the goods is arranged by the buyer. 3.2 Researching and Analysing Supply Markets, 57. CIF Carriage and insurance to be arranged by the seller Risk transfer from the seller to the buyer when the goods pass the ship's rail Costs transfer at port of destination, buyer paying such costs as are not for the seller's account under the contract of carriage In practice it should be used for situations where the seller has direct access to the vessel for loading, e.g. In CIF terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. Further, if the product requires additional customs duties, export paperwork, or inspections or rerouting, the seller must cover these expenses. The INCOTERMS are contractual terms, not laws such as might be enacted by a legislative authority, and the use of them in the procurement contract does not avoid the need for a separate contract for the carriage of goods involved in the sale. The parties agree to be bound by them and thus, must specify clearly the appropriate version of INCOTERMS applicable. The framework for obtaining and selecting offers, 71. Risks and costs are transferred to the buyer when the goods are made available to the buyer. Consider this hypothetical example: Best Buy orders 100 containers of flat-screen televisions from Sony using CIF to Kobe, a Japanese port. 1.1 Introduction to Procurement Management, 12. E-catalogues, e-auction and reverse auction, IV. 715 for the text. The most recent version of INCOTERMS is INCOTERMS 2000, which came into force on 1st January 2000, and is a revision of the INCOTERMS 1990. The Best Buy television order receives damage from water during fire fighting efforts. Risk transfer occurs to the buyer just before import clearance and costs are to the seller up to the import clearance when duty is unpaid. Ask for a free evaluation of the online course, without obligation. 4. INCOTERMS refer to the set of international rules for the interpretation of the chief terms used in foreign trade contracts first published by the International Chamber of Trade in 1936 (now International Chamber of Commerce) and amended in 1953, 1967, 1976, 1980, 1990 and 2000. However, this term may have different meanings in different countries and it is possible that misinterpretations will arise. When duty is paid, the seller bears all burdens through import clearance. E-commerce, e-business and e-procurement, 38. Procurement’s role in business strategy, III. Terms of Cost, Insurance, and Freight (CIF), Learn About the Free Carrier – FCA Delivery Option, Everything You Need to Know About Free Alongside (FAS), Making Sure You Get the Goods: Delivered Duty Unpaid (DDU). There are advantages and disadvantages of using any INCOTERMS for the benefit of any party. 3.1 Developing Requirement Specifications, 51. You can appoint forwarders or shipping agents to work with their shipping counterparts overseas to arrange pick up from suppliers’ premises and deliver all the way to your company in Malaysia. We shall now focus on the issue of the point at which certain risks pass from the supplier to the buyer. CIF determines when the responsibility for goods transfers from the seller to the buyer. 4.2 Contractual Defaults and Disputes, 78. 2.1 Organisational Structures for Procurement Management, 28. Under the ‘F’ term (FCA, FAS and FOB), the seller is to deliver the goods to a carrier appointed by the buyer. The International Chamber of Commerce (ICC) recommends that ‘INCOTERMS 2000’ be referred to specifically whenever the terms are used together with a location. CIF determines when the responsibility for goods transfers from the seller to the buyer. In international trade, however, the types of terms that are developed in one country as opposed to another and the manner in which one country’s court interpret a term vary.
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