Why is it better to purchase cargo under FOB terms on the import side?
The seller delivers the goods and hands it over to the buyer on board the ship. From here on, transport costs and transport organization is entirely directed by the customer through its designated freight forwarder. There is a plethora of reasons why this is better for the importer:
- All costs are known in advance under the terms and conditions as offered by the importers freight forwarder
- Under CFR/CIF terms, importer has no clear information about the destination charges, which are always much higher than the entire cost of the transportation would have cost, should the cargo be transported under FOB terms.
- The deadline for payment of transport in talks with its shippers, which can provide a postponement of the date of arrival of the consignment at the destination port of landing
- Most importantly, the importer decides on the service and quality of the transport and therefore controls the critical parts of the supply chain: cost and transit time