CIF, disadvantages to Buyer
You can read Pros and Cons of each Inco Terms for both importer and exporter in this website.
Under this post, we are trying to point out the challenges facing by an importer under CIF delivery terms. Let us discuss one by one :
01. In international trade, one of the main disadvantages under CIF for importer is that the cost of movement of goods is taken care till the named place by the exporter, but the risks of movement of goods are on importer’s shoulder immediately up on the cargo loaded in to the Vessel.
02. The main carriage is controlled by the exporter under CIF terms in export import business by handling ocean freight. Appointing a poor shipping carrier or a poor freight forwarder to save ocean freight by the seller may affect the movement of goods in rendering good service to importer in delivering the goods. This is a drawback for importer when goods are moved on CIF basis of delivery terms.
03. Another disadvantage under CIF terms for importer is that in a CIF terms of delivery under export import business, the exporter is liable to arrange insurance on movement of goods till the named destination contracted. However, the exporter may arrange minimum insurance cover which may lead to problems and disputes between exporter and importer. So under CIF terms, the importer should satisfy the clauses covered by exporter on movement of goods or else, the importer has to contract separately with exporter about all risks cover under their sale contract.
04. In export import trade, the importer under CIF terms of delivery should be well conversant with import customs clearance process, import documentation, import licensing procedures, import taxes if any etc. failing which he is liable to meet additional expenses than anticipated resulting loss in the said business transaction. This is another fly in the ointment for importer under CIF terms of delivery goods.
05. One of the other disadvantages for importer under CIF terms of delivery is that the importer under CIF terms also is liable to undertake on carriage process from the destination named port to his final destination. Lacking sound knowledge and experience in handling local transportation results additional costs than calculated.
06. Since the exporter handles main carriage under CIF delivery rules, the importer has to request the exporter for getting export data, EGM or Vessel sailing details. This is a drawback for importer under the contract carriage on CIF basis.
07. Another disadvantage under CIF terms for buyer is that although the cost is paid to the named location by seller, the unloading liability is with the buyer under CIF delivery rules. So the costs and risks involved under unloading goods at buyer’s place is under the liability of buyer.
Hope the above details about the demerits for a buyer under CIF delivery terms.
Share your experience below in handling CIF terms of delivery and its stumbling blocks for importer.