Adding more to business Intellect…Part - IComparison Shipping Terms FOB vs CIF 1A Study by Legal Compliance support team - Group A Logistics

Trade Shipping terms – FOB / CIFFree on Board (FOB) - An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for the costs and risks of delivering the goods past the ship’s rail at the named port of shipment. The Free On Board term is used only for ocean or inland waterway transport.Cost, Insurance and Freight - An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods past the ship’s rail at the port of shipment (not destination). The seller is also responsible for paying for the costs associated with transport of the goods to the named port at destination. However, once the goods pass the ship’s rail at the port of shipment, the buyer assumes responsibility for risk of loss or damage as well as any additional transport costs. The seller is also responsible for procuring and paying for marine insurance in the buyer’s name for the shipment. The Cost and Freight term is used only for ocean or inland waterway transport.2A Study by Legal Compliance support team - Group A Logistics

Free on Board (FOB) - An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for the costs and risks of delivering the goods past the ship’s rail at the named port of shipment. The Free On Board term is used only for ocean or inland waterway transport.

Cost, Insurance and Freight - An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods past the ship’s rail at the port of shipment (not destination). The seller is also responsible for paying for the costs associated with transport of the goods to the named port at destination. However, once the goods pass the ship’s rail at the port of shipment, the buyer assumes responsibility for risk of loss or damage as well as any additional transport costs. The seller is also responsible for procuring and paying for marine insurance in the buyer’s name for the shipment. The Cost and Freight term is used only for ocean or inland waterway transport.

Why ship FOB? & advantages over CIFBuying Free On Board has two major benefits over CIF · More competitive freight rates · Enhanced shipment control When shipping CIF, companies must be careful that they’re shipping rates are competitive since overseas suppliers are always inclined to mark up their freight cost for the extra service provided in arranging shipments. Smart importers quickly learn that they can obtain very competitive shipping rates even with small to medium freight volumes. While cost is always important, there are other major reasons for buying FOB. Increased supply chain visibility and control is a critical FOB benefit. By taking title to the goods as they cross the ship’s rail at the overseas port of shipment, importers are better able to obtain accurate and timely shipment information by working with the third party logistics provider of their choosing. In this way, they are assured their freight partner is working in their best interest, not that of their supplier’s. More on to this, consignee can have more savings in terms of fund planning’s as in case of CIF consignee need to pay freight & other charges alongwith cost of goods to go forward, wherein they lost interest till the date of shipment arrival at final destination port but for FOB terms they need to pay freight & other components of freight only after arrival of goods at final destination port. This is the major factor which benefit consignee to gain an edge on competition for cost controlled movements. Adding more to controls and benefits for cargo movements, majority for those importers who avail any duty or other related benefits, in such case using own freight forwarder for movements can control the shipment schedule according to preparation such as site / relevant licenses / exemption certificates / regulatory etc. Importer saves on part of un-necessary demurrages & detentions by passing through of delay issues concerning shipment costing’s.3A Study by Legal Compliance support team - Group A Logistics

Buying Free On Board has two major benefits over CIF · More competitive freight rates · Enhanced shipment control When shipping CIF, companies must be careful that they’re shipping rates are competitive since overseas suppliers are always inclined to mark up their freight cost for the extra service provided in arranging shipments. Smart importers quickly learn that they can obtain very competitive shipping rates even with small to medium freight volumes. While cost is always important, there are other major reasons for buying FOB. Increased supply chain visibility and control is a critical FOB benefit. By taking title to the goods as they cross the ship’s rail at the overseas port of shipment, importers are better able to obtain accurate and timely shipment information by working with the third party logistics provider of their choosing. In this way, they are assured their freight partner is working in their best interest, not that of their supplier’s.

More on to this, consignee can have more savings in terms of fund planning’s as in case of CIF consignee need to pay freight & other charges alongwith cost of goods to go forward, wherein they lost interest till the date of shipment arrival at final destination port but for FOB terms they need to pay freight & other components of freight only after arrival of goods at final destination port. This is the major factor which benefit consignee to gain an edge on competition for cost controlled movements.

Adding more to controls and benefits for cargo movements, majority for those importers who avail any duty or other related benefits, in such case using own freight forwarder for movements can control the shipment schedule according to preparation such as site / relevant licenses / exemption certificates / regulatory etc. Importer saves on part of un-necessary demurrages & detentions by passing through of delay issues concerning shipment costing’s.

Why CIF is being used?Generally speaking, importers prefer CIF terms when either they’re new to international trade or they have relatively very little freight volume. These importers often find CIF simpler in that their suppliers are responsible for arranging freight and insurance details. Under these terms the importer relinquishes control of choosing freight carriers, routing and other shipping specifics. For these companies, convenience outweighs the need for enhanced shipment control and associated freight savings. Shipping CIF grows increasingly difficult as companies increase their number of overseas suppliers and overall freight volume. The greater the number of CIF shipments, the more problems can occur with obtaining accurate shipment information. Overseas suppliers are not well positioned to handle service issues that develop in-transit. What’s more, they are not required to arrange anything past the port of destination, so final delivery concerns, monitoring of penalty situations such as demurrages, etc. are all the responsibility of the importer. Regular importers quickly grow tired of the hassle of relying on suppliers and their freight agents for shipment information.4A Study by Legal Compliance support team - Group A Logistics

Generally speaking, importers prefer CIF terms when either they’re new to international trade or they have relatively very little freight volume. These importers often find CIF simpler in that their suppliers are responsible for arranging freight and insurance details. Under these terms the importer relinquishes control of choosing freight carriers, routing and other shipping specifics. For these companies, convenience outweighs the need for enhanced shipment control and associated freight savings. Shipping CIF grows increasingly difficult as companies increase their number of overseas suppliers and overall freight volume. The greater the number of CIF shipments, the more problems can occur with obtaining accurate shipment information. Overseas suppliers are not well positioned to handle service issues that develop in-transit. What’s more, they are not required to arrange anything past the port of destination, so final delivery concerns, monitoring of penalty situations such as demurrages, etc. are all the responsibility of the importer. Regular importers quickly grow tired of the hassle of relying on suppliers and their freight agents for shipment information.

Importance and Obstacle's of Legal Compliance as SEZ/EOU/STPI UnitsPart - IIComparing GAL LCS vs Others5A Study by Legal Compliance support team - Group A Logistics

Group A Logistics (LCS) Legal Compliance Support - ServicesOn order confirmation from Importer place on Vendors / Suppliers GAL Overseas Co-ordination & support teams get activatedRegular Follow-up with Shipper to arrange on time collection / Delivery of shipment as per agreed terms Ex-Works/FOBChecking all shipment related documents for Regulatory Compliance at first handApplication to Central Excise Authorities for exemption with information to Importer checking on site arrangements for materials inventoryMaintaining proper records with STPI unit and Central Excise as per regulatory requirements as per legal lawsScheduling Shipment as per Importers requirements / arrangementsArranging Clearances as per Schedule / Requirements of Importer & maintaining customs records as per regulatory requirementsShipment Verification by Central Excise & arranging Re-warehousing certificate for further submission with CustomsRegular follow-up with CE & STPI to update of all relevant records & Compliance6A Study by Legal Compliance support team - Group A Logistics

On order confirmation from Importer place on Vendors / Suppliers GAL Overseas Co-ordination & support teams get activated

Regular Follow-up with Shipper to arrange on time collection / Delivery of shipment as per agreed terms Ex-Works/FOB

Checking all shipment related documents for Regulatory Compliance at first hand

Application to Central Excise Authorities for exemption with information to Importer checking on site arrangements for materials inventory

Maintaining proper records with STPI unit and Central Excise as per regulatory requirements as per legal laws

Scheduling Shipment as per Importers requirements / arrangements

Arranging Clearances as per Schedule / Requirements of Importer & maintaining customs records as per regulatory requirements

Shipment Verification by Central Excise & arranging Re-warehousing certificate for further submission with Customs

Regular follow-up with CE & STPI to update of all relevant records & Compliance

Group A Logistics (LCS) Legal Compliance Support - BenefitsOffers one window solutions for all supply chain requirementsProper Regulatory compliance with single service partner handlingSaves crucial time / cost & most important is countering legal shortfalls Maintaining legal recordsProper co-ordination at all aspects of tradeYour legal identity is in safe hands7A Study by Legal Compliance support team - Group A Logistics

Offers one window solutions for all supply chain requirements

Proper Regulatory compliance with single service partner handling

Saves crucial time / cost & most important is countering legal shortfalls

Maintaining legal records

Proper co-ordination at all aspects of trade

Your legal identity is in safe hands

What if Legal Compliance is in different hands using as CIF terms Generally, In case of imports purposed under CIF term Importer has no control on legal matters, since shipper is responsible to chose agent for freight forwarding & destination clearances. Fact of shipments is that shipment will be assigned to Importer and will be cleared as one legal identity (IEC) clubbing all sort of concerns to one identity whereas CIF movements assigned to different freight forwarders & clearance support services can land into different hands for requirements, In general such handling allows legal matter to be handed over to un-known hands resulting illogical & un-ethical practices to take part.How CIF mechanism works: -Consignee places CIF orders to Different Vendors / SuppliersOther Freight Forwarder In-comparison to GALOther Freight forwarder can arrange shipments but they will not have proper control on shipment as per regulatory requirements under STPI considering on site arrangements & schedulesUnknown CHA to Handle Importer Regulatory matters In-comparison to GAL LCSHandling regulatory matters with different service providers can arrive to an un-healthy legal compliance as they may not be familiar with specific importer regulatory requirements & understandings for legal compliance specification of importer, in-complete documentation is the biggest challenge in such cases which are difficult to handle at later stage 8A Study by Legal Compliance support team - Group A Logistics

Generally, In case of imports purposed under CIF term Importer has no control on legal matters, since shipper is responsible to chose agent for freight forwarding & destination clearances. Fact of shipments is that shipment will be assigned to Importer and will be cleared as one legal identity (IEC) clubbing all sort of concerns to one identity whereas CIF movements assigned to different freight forwarders & clearance support services can land into different hands for requirements, In general such handling allows legal matter to be handed over to un-known hands resulting illogical & un-ethical practices to take part.

How CIF mechanism works: -

Consignee places CIF orders to Different Vendors / Suppliers

Other Freight Forwarder In-comparison to GAL

Other Freight forwarder can arrange shipments but they will not have proper control on shipment as per regulatory requirements under STPI considering on site arrangements & schedules

Unknown CHA to Handle Importer Regulatory matters In-comparison to GAL LCS

Handling regulatory matters with different service providers can arrive to an un-healthy legal compliance as they may not be familiar with specific importer regulatory requirements & understandings for legal compliance specification of importer, in-complete documentation is the biggest challenge in such cases which are difficult to handle at later stage

Thank you…….  LCS Team| Group A Logistics | www.groupalogistics.com: +91 11 2589 5463 |: +91 11 2589 5363 |: +91-9999404449 | vikas.maini@groupalogistics.comOffice No 301 -302, IIIrd Floor, Plot No 50, Community Center Naryana Industrial Area Phase-I, New Delhi-110028, IndiaBraches @ Chennai / Jaipur / Kolkata / MumbaiRedefining your Business... Your Business our Concern...9A Study by Legal Compliance support team - Group A Logistics