Understanding The Terms Associated With Shipping Sea Freight

Ocean cargo shipping is often believed to be advantageous, especially to corporations who require transportation of large masses of products and goods. As a result, sea freight is the speediest and most efficient method for transporting large loads that are not time-sensitive.

Shipping Sea Freight

CIF/CFR Shipping Terms

So, before choosing a delivery service, you need to consider the speed you need to ship your items as well as the cost. In the shipping industry, CIF shipping terms include cost, insurance, and freight whilst CFR terms cover the cost and freight of shipped products. Both terms are identical except for the cost of the marine insurance that is paid by the seller. The terms separate the differences in obligations between the shipper or supplier and the consignee or the buyer.

When using CIF or CFR terms, the seller’s invoice includes the cost of the goods shipped and the freight cost that is required to send products. The seller pays for everything including the freight up to a specific destination point. The first charge to the buyer is at the terminal at the destination point. Both CIF and CFR costing is used by a large variety of sea freight companies in the UK and other countries.

Keeping Shipping Hassle-Free

If a buyer knows the exact cost he or she will have to assume upon the arrival of a shipment, CIF or CFR terms offer a hassle-free method of getting the necessary goods to an intended destination. The supplier arranges for the products to be shipped to the buyer’s country. When the goods arrive, the supplier’s shipping agent contacts the buyer to arrange delivery.

Specifically, CIF terms are often employed to import FCL or full container load shipments. If you happen to sell products and export them outside the EU, then CFR terms offer a way to divide the responsibility between your company and a buyer overseas.

Disadvantages Associated with Using CIF or CFR Terms

However, there can be some issues when setting the above terms. When problems arise, it is usually because the costs are not managed effectively from the beginning to the end. Also, hidden charges sometimes surface. The costs of services you expected to pay can be inflated as well. If you are not fully prepared, delays and additional costs can crop up unexpectedly.

That is why many companies depend on the supplier to organise their shipments and deliveries. Cost and simplicity makes this type of transaction appealing. If you are an importer who is receiving goods on CIF or CFR terms, your responsibilities begin the moment the shipment arrives at its destination. Once the goods land, you are responsible for the costs and arrangements.

Some of the Costs

Costs include import customs clearance, import taxes and duties, terminal handling at the POD (or port of discharge), and onwards delivery to the final destination point. You are also responsible for any other fees. Some of the charges may include hand-over costs, agency fees, documents fees, or deferment costs.

When utilising FOB (freight on board) terms, the goods are under the control of the same agent from the beginning to finish. As a result, any hidden expenses are cut out of the equation. If you have not received goods often, then FOB terms are recommended when shipping.