Difference between CIF and FOB in International Marketing

Running head: International marketing
International marketing

International marketing
Table of Contents
Introduction.................................................................................................................................................3
Difference between CIF and FOB...............................................................................................................3
Conclusion...................................................................................................................................................5
References...................................................................................................................................................6
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International marketing
Introduction
The report discusses the difference between CIF and FOB. CIF and FOB are two variable used in
international shipping process for selling and buying of goods overseas. Both have similarities
but also differ from each other at a wider level. Hence, the report presents those differences that
are generally seen between CIF and FOB. The report covers all the major differences seen
between CIF and FOB. It carries the idea of how sellers and buyers carry out their business and
what charges they have to pay during the process of selling and buying. The paper explains about
the process of working overseas which also involves hidden charges that are generally seen in
these areas.
Difference between CIF and FOB
CIF stands for Cost, Insurance, and Freight whereas FOB stands for Free On Board. Both the
terms deal with international pricing where the transaction takes place between the seller and the
buyer. But both the terms differ in much variety than each other. CIF and FOB provide a vast
difference in understanding about how international pricing is assigned to the goods and services.
In the agreements made under CIP, it is the responsibility of the seller to transport the goods,
board the goods for shipment and provide them to the buyer. Whereas, FOB is comparatively
convenient for the seller as they are relieved from their duty after transporting the goods on the
board. After the goods have been board they are taken care by the buyer and everything is under
buyer’s responsibility (Feenstra and Romalis, 2014).
Cost, Insurance, and Freight agreement is an expensive method of doing business over the
transporting of goods and services than Free On Board agreement. For the seller, it is beneficial
to prefer CIF and buyers usually prefer CIF whereas FOB enables the sellers to put their cost and
imply their charges over the goods where the buyers end up paying the extra fees than needed. In
FOB, the buyer can manage the supply of goods on his condition. Hence, CIF can benefit the
sellers than buyers. The seller has the chance to make extra money while transporting as the
buyer end up paying for charges like dock service, customs clearance fees, etc. Both the terms
work on a legal basis, but the workings of FOB are also hidden contracts and sellers have to
waste a lot of illegal money during the business.
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