Disadvantages under CIF to Seller
Under a series of posts about Inco terms 2020, we discuss deeply about the advantages and disadvantages for exporters and importers against each delivery term.
In this post we discuss about the demerits for exporter under CIF delivery rules in import export business.
Here are those 08 challenges for a seller when he contracts CIF delivery terms:
01.Since the importer undertakes on carriage from destination named port to his final destination under CIF terms of delivery, the exporter does not have control over tracking data of shipment till arriving goods at final destination. This is a demerit for exporter under CIF terms.
02. One of the other disadvantages for importer under CIF terms of delivery is that; although the risk of main carriage ends when cargo loaded on board the vessel, under CIF delivery rules, the Seller has to pay ocean freight till the named destination contracted. The exporter should have sound knowledge and experience about the ocean carriers and their service to serve the importer for good business relationship. This is a demerit for seller when handling contract of carriage as CIF terms.
03. If any port congestion, vessel shortage or vessel cancellation occurs at loading port, under CIF terms of delivery in export import business, the exporter is responsible to bear such costs and risks. Difficulty in meeting delivery time with buyer may also be faced. This is a drawback for exporter under CIF terms of delivery.
04. Another disadvantage for seller is that under CIF delivery terms, the seller has no control over on carriage till final destination of importer under CIF terms of delivery under international trade.
05. Although the exporter has to arrange minimum insurance against movement of goods under CIF, the importer may insist him to arrange all risk cover insurance, as the buyer is responsible for total risks of goods from goods loaded in to the vessel to buyer’s destination named place. A separate agreement may be required between buyer and seller under their sales contract subjected to the same. This is a disadvantage for exporter under CIF terms.
06. One of the other disadvantages for exporter is that under CIF rules in export import biz, the exporter should have sound knowledge and experience in handling export regulations, export documentation, export taxes if any against his product failing which the exporter is liable to pay additional expenses than anticipated.
07. The exporter does not have any control over safety of goods, once the cargo is loaded in to Vessel. So, the seller cannot assure the safety of goods sold, from that point to final destination including unloading of cargo at importer’s premises as the importer is responsible for all such movement of goods. This is another drawback for buyer under CIF delivery terms.
08. Compared to other inco terms except DDP, under CIF terms, the exporter does not want to learn import clearance, import government regulations in buyer’s country. This is a weakness for exporter under CIF terms. This reason may lack exporter to enter into a sale contract where the buyer specifically ask for DDP terms of delivery. So in our point of view, every exporter and importer should learn and experience government rules and regulations of both exporting and importing country for strengthening their business.
We hope the above information about the downsides against CIF terms of delivery for an exporter under international business.
Share below your experience in handling CIF delivery terms under Inco terms 2020 and share below your views on the subject, disadvantage for exporter under CIF delivery terms.