We are exporting used trucks/machinery for 40 years, and often use INCOTERMS when we confirm the vehicle price with customers.

It is my second year at YAMADA SHARYO CO., LTD. When I started working in this company, I had no idea about INCOTERMS. What is INCOTERMS? What indicates the abbreviation (FOB/C&F/CIF) attached before the price?

If you also have no idea or don’t understand very well about Incoterms, we are glad to help you before starting business with you.

What is INCOTERMS?

http://yamada-co.jp/en/stock/detail/22023

You find your favorite ISUZU ELF, which price is FOB US$3,000.  Do you know what expenses are included in FOB US$3,000?

It is very different that its price is including the shipping cost, insurance fee etc. or not.

INCOTERMS are formulated by Intern. Chamber of Commerce (I.C.C.).

It makes the area of responsibility clear between seller and buyer in legal, and is used as the standard trade terms in the world.

The responsibility is included in paying shipping cost and risks of accident, so both of them can trade smoothly.

What Does Each Terms mean?

We usually use three Incoterms on our sales website, FOB/C&F/CIF.
(reference: http://yamada-co.jp/en/faq/#category10)

1) FOB (Free On Board)
When a vehicle is loaded on the vessel, the responsibility of the seller is expired, and after the point of this, the responsibility to pay all shipping cost and the risk of the accident is shifted to buyer.

2) C&F(Cost and Freight)

*In formal, this term is mentioned “CFR”.
The point of responsibility of risk is the same as FOB. (When a vehicle is put on the vessel, the responsibility of risk is shifted to buyer.)
As for the shipping cost, it would be on the seller until the vessel gets to the port of discharge. (the port vessel arriving).

3) CIF (Cost, Insurance, and Freight)
 The point of responsibility of risk is the same as FOB and C&F. (When a vehicle is loaded on the vessel, the responsibility of risk is shifted to buyer.) Also shipping cost is the same as C&F.
In this term, insurance fee is on the seller. About other terms, the buyer is recommended to apply an insurance in case of a shipping accident.

Which term is better when I buy?

You may be confused somehow, what are the differences? What advantages does each term have?

For first, please see the above figure for your help.

Change point of the responsibility of the accident risk is the same between three terms, only difference is how much shall buyer or seller pay to shipping cost.

Even so, we guess you are thinking which term has advantages for you. We show some advantages and disadvantages for each terms.

<FOB>
Advantage
1) You can choose the shipping line and may get good deal of the shipping cost.

2) You can arrange the shipping schedule (you can nominate which vessel you would like the seller to load*).

*If the seller is not ready to ship your vehicle out due to pre-ship inspection, you may not be able to choose your favorable schedule.

Disadvantage
1) Shipping fee may be taxable in some countries and if so, you have to pay expense than when C&F or CIF term.

2) It takes time and effort to negotiate shipping cost or other charge with shipping line.

<C&F>

Advantage
1) You can get better deal of the shipping cost from the seller than you have.

2) You don’t have to manage bothering thing with shipping line.

Disadvantage
1) Delivery term may sometimes become longer due to seller’s convenience*

2) You cannot choose your favorable shipping line.
*Just one thing to say, we are surely trying to delivery your vehicle as soon as ready to ship.

<CIF>
Advantage
1) You can leave the any shipping arrangement to seller.

2) You don’t have to pay any shipping cost until your vehicle is arriving at your designated port.

Disadvantage
Same as C&F term

It is up to you which term you would use.
If you are the beginner of importing, we recommend you CIF term because you can leave seller all of shipping arrangement.

If you have any inquiry about the Incoterms, please feel free to click INQUIRY and ask us!.
Sales website is HERE

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Yamada Sharyo Co., Ltd.

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