Confusing Advice

[Sidney Young]

Hi there,

I am trying to understand/learn/work out the different types of shipment terms, risk associated and the efficiency of each shipment term.

While I appreciate that recommended shipment terms here is FOB, when importing from China.

I am confused by conflicting advice given by Import Expert, see below extract/messages from the post in question.

Unsure if anyone would like to add/clarify that once you have agreed the costs with your supplier under CIF term then the only cost you must factor in will be UK Forwarders fees plus Import Duty & VAT and you can choose your local forwarder?

Here is the link for the original post.

(sorry i can't post the link)


My Office in China:

CIF means that your shipment will be shipped to Felixstowe, freight paid.
From that point you will need to contact a UK Forwarder (Not DHL) to help you clear UK Customs and arrange delivery.
You will have to pay the UK Forwarders fees plus Import Duty & VAT.
Make sure you have the goods checked in China, before making your final payment to your supplier. Adequate packing will be one point (of several) to check.

Mike Goodwin:

To confirm. CIF terms mean that all transport charges up to arrival Felixstowe port have been paid by your supplier. From then on you will be responsible for handling, customs clearance, duty & VAT and delivery to your chosen point. Use a reliable UK Freight Forwarder who will take care of all this for you.

Import Expert:

Shipping under CIF terms will end up costing you quite a lot more than FOB terms. Under CIF you will usually need to use whichever UK forwarder is shown on the bill of lading document. CIF costs will usually be inflated and often a kickback goes back to China. Nothing illegal or in fact immoral - just the way they can make a bit more money. No experienced importer will ship LCL on CIF terms for this reason. If it's not too late - see if they will change the terms. Your own forwarder can take over the shipment on arrival, but they will still need to pay all charges to the named forwarder, who may also charge a handover fee to your agent.

 

[GraemeL]

Read this, particularly the paragraphs at the end about the dangers of CIF
https://www.ukbusinessforums.co.uk/...if-and-fob-mean-and-the-pros-and-cons.288040/

I am not going to go back to the original posts you are quoting because the context in which those bits of advice was given to you matters.

"Under CIF you will usually need to use whichever UK forwarder is shown on the bill of lading document. CIF costs will usually be inflated and often a kickback goes back to China." is correct.

 

[Mike Foulds]

As mentioned by others, CIF (Standas for Cost Insurance and Freight) means that responsibility for UK costs would remain with yourself including Duty and Vat payable. I would suggest that if you google search INCOTERMS, and look under images, you should be able to find a clear graphic which shows you who has responsibility for costs based on the various shipping terms. I would definitely recommend booking shipments under FOB terms, and would suggest you contact 2 or 3 UK based forwarders to ask for rates if you made the booking through them, and then went with the quote/company you felt most comfortable with (Not necessarily the cheapest! As they say, "Pay peanuts, get monkeys!". Hope that helps.

 

[CHUKTC]

I would agree with the comments of your import expert shipping CIF can lead to unexpected charges. You will need to pay port and customs clearance charges as well as duty and VAT and onward transportation. If it is a full container it should be possible to control the port costs and shop around to get a good price. For a part load however as stated you will have to use the freight forwarder chosen by the shipper. You ave no choice in this, nor any control over their fees. As pointed out it is common practice, particularly in China to offer you attractive shipping rates knowing they will receive a high commission o the freight forwarders charges in the UK. As stated above this is not illegal although I think morally its questionable and something you must be aware of. We always recommend when buying form China to buy ex works or FOB and then arrange the shipping and port clearance yourself. We can usually save our customers a lot of money doing it that way.

 

[Sidney Young]

Guys,

Thanks for all your input, much appreciated, specially the link provided by Graeme, very informative indeed.

After reading your responses, I feltl that my knowledge has got better and probably have a better grasp of the incoterm.

Above posts gave me the impression that probably my question was not worded correctly, while I do appreciate that the message given is clear that FOB is the way to go (many advantages), but I did not think I was questioning the merit of the FOB!

The referenced post was giving conflicting advice on two fronts, 1) Do we have option to select the local forwarder or it will be written on bill of lading so we can’t select the local forwarder? 2) IF we agreed CIF costs with the supplier, do we expect the local forwarder (selected) to add additional/inflated costs, in additional to usual forwarders fees plus Import Duty & VAT?

I would be grateful if above two points are clarified.

Many thanks.

 

[GraemeL]

There is nothing definite about CIF!
1) Probably selected by supplier
2) Possibly - depends on what supplier negotiated with FF

No-one can answer as definitively as you are wishing for. Is this an academic question?

 

[CHUKTC]

In our experience if the supplier ships CIF for a part container it is always there agent who appoints the freight forwarder. Remember it's not only your goods in the container someone has to coordinate the unloading and that is the shipping agent.
In answer to 2 the problem you have is you don't know how much you are going to be charged until the goods arrive in the port. Not everyone adds on exorbitant fees but many do especially if they quote low shipping prices (effectively funding the shipping though the port costs) so if you ship CIF you should be prepared for this.

 

[Mike Godwin]

Contrary to some previous comments and to answer your questions directly
1. You can choose your own UK freight forwarder to receive and handle your shipment once it arrives at FXT or Soton. Best practice is to instruct your supplier to place your chosen forwarder as the "notify party" on the Bill of Lading.
2. A reputable UK forwarder will not add additional/inflated costs if you pick the right one. Get a firm quotation before hand for their services so you won't have any surprises.

Ads I try to inform everyone on here. "If you control the shipping arrangement you control the costs" My advice would be to buy on FOB terms and arrange your own shipping (an easy process via any chosen UK freight forwarder). Agree a price on every shipment with your chosen forwarder and build a relationship of trust with them.