When you need to import goods, we give you five reasons to choose Ex Works or FOB over the other shipping terms. While CIF or CFR are good to use when new to importing, they have many disadvantages when you are importing regularly or importing large value shipments.
Import shipping terms you need to know
As an importer you need not understand every import shipping term available; however, you should be familiar with the four most common import shipping terms.
EXW: Ex Works (Door to door)
This is where you, the importer, assumes all the costs and risks associated with the transportation of the goods. The seller of the goods only has to ensure that the goods are ready for pick-up at their place of business. When we ship goods as Ex work for you, it covers the following:
- Export documents/clearance
- Export pick up
- Freight
- Destination port surcharges
- Customs clearance
- Delivery
FOB: Free on board (Port to door)
This is similar to Ex Works except that the risk of loss of the goods is not entirely with you, the importer. Responsibility for the goods being shipped is transferred to you only after they have been transported from the seller’s premises to the port of origin. At this point, loading at the port of origin and transportation of the goods to their destination become the buyer’s obligation. When we ship goods for you as FOB, this covers:
- Freight
- Port Surcharges
- Customs Clearance
- Delivery
Notes on Ex Works and FOB
The main difference between Ex Works and FOB is that with Ex Works the importer is responsible for all aspects of transporting the goods from door-to-door, while with FOB the importer is responsible for the origin port to door at destination.
Customs fees at destination port are optional
With ex-works or FOB terms, customs fees at the origin port are included, however it is optional to include customs fees at destination port. If you want the import freight quote to include destination port customs costs then the terms are ’Ex Works + customs’ or ‘FOB + customs’. If you wish to pay the destination port customs costs yourself, then the terms are simply ‘Ex Works or ‘FOB’.
Insurance and quarantine not included
It is important to know that Ex Works or FOB terms do not include cargo insurance to cover the value of the goods while shipping. We are, however, able to provide this for you if required. These terms do not include any quarantine fees that may occur at the port of destination. Feel free to talk to us if you think you have goods that ‘may be’ subject to quarantine.
CIF: Cost, insurance & freight
This is where the seller of the goods assumes all costs and risks associated with transportation of the goods to the destination port. This includes cargo insurance to the destination port. You, the importer of the goods, are responsible for the unloading and customs clearance of the goods at the destination port, as well as pickup of goods, cargo insurance and delivery to the door at destination.
CFR: Cost & Freight
This is similar to CIF, except that the seller is not responsible for the cargo insurance. You, the importer, are responsible for the cargo insurance.
Five reasons to choose Ex Works or FOB instead of CIF or CFR
Why choose Ex Works or FOB
Importers generally use CIF or CRF when they are new importing. Organising importshipping can be very detailed and complicated. As the seller organises all the shipping, the importing is very easy, as you do not have to deal with the shipping details. Ex Works or FOB means you are organising all or most of the shipping yourself.
Saves money
CIF or CRF import freight terms are more expensive than Ex Works or FOB. There will be a cost for arranging the shipping that the seller has to pass on. Further, the shipping becomes a cost of sale for the seller. As their forwarder has to ship the goods as part of the sale, the seller will need to add a margin to that cost in order to maintain their operating profit margin. This also applies to the cargo insurance when CIF is used. Further, you can end up paying for duty on freight as well as insurance due to paperwork that is difficult to work with. When you use Ex Works or FOB, all or most of the shipping costs is paid for by you, and avoids any costs from the seller being involved.
Better communication
Shipping under CIF or CRF terms is performed by contractors engaged by the seller. If problems occur these contractors must communicate with you through the seller, and visa-versa. This adds complexity to the communication process. Obtaining accurate shipment information is more difficult and contractors might not be able to help you in a timely manner. Even one day of delay in resolving an issue may be very costly. Under Ex Works and FOB you have better communication, as you avoid having to go through the seller.
Avoids surprise costs
With CIF or CRF terms you can get surprised by costs that are not obvious within the contract. As the seller’s responsibility stops at the destination port, you might have to pay additional costs if problems occur at this point before your goods are cleared. These can include:
- Extra demurrage
- Per diem
- Customs clearance
- Docking fees
Simpler paperwork
When you use CIF or CRF import shipping terms, you often have to pay the duty on the freight and cargo insurance, as the paperwork is not simple. Freight and cargo insurance costs do not incur duty. It is, however, often difficult to separate these from the goods invoice and they are not allowed to be estimated. These have to be shown on standalone invoices, with evidence of payment. This problem does not happen when you use Ex Works or FOB, since the freight and insurance charges are not combined in the goods invoice but shown on standalone invoices with payments.
Better control
When using Ex Works or FOB for import shipping terms, you have much better control of the freight and costs of freight. By directly engaging your freight forwarder you have greater ability to obtain competitive freight rates. This will remove the seller from the shipping process and allow you to obtain accurate and timely information as required. Your freight forwarder will be able to better assist you should any problem arise.
Need assistance with getting your Ex Works or FOB freight?
It is for these five reasons that we offer Ex Works or FOB rather than CIF or CRF. If you would like assistance shipping on Ex Works or FOB terms then let the team at Freight Forwarder Quote Online help. We offer a full range of freight services and are happy to give you the help you need.
Our shipping network has more than 40,000 locations worldwide and we provide full-costing upfront Ex Works or FOB freight with no hidden costs. Our forwarding service is fast, lean and transparent, so contact us online and send a message. You can even message us on Facebook for help on Ex Works freight.
