When engaging in the international trade of coconut charcoal briquettes, it is crucial to understand the intricacies of the shipping process, including the specific Incoterms that shape the responsibilities and liabilities of buyers and sellers. Let’s delve into two essential Incoterms for such shipments:
FOB means that the exporter is responsible for all deliveries and shipping documents until the charcoal is loaded onto the ship. Once aboard, the risk of transportation shifts from the seller to the buyer.
Many suppliers of coconut charcoal prefer to use Telegraphic Transfer Cash in Advance with a 50% initial payment and 50% for the second payment. Additionally, they often adopt the FOB Incoterms.
Importers need to be well-prepared before importing coconut charcoal and manage their finances effectively. Late payments by importers are not uncommon, and planning is crucial to ensure a smooth transaction.
Suppliers prefer FOB because they cannot control the goods once they are on the cargo ship. They can track the shipment but are not responsible for handling or protecting the goods. If any issues or delays occur after the goods are on the cargo ship, the supplier is not accountable. This places the burden of responsibility on the importers.
To address this challenge, importers should prepare their cash flow and consider expenses to mitigate risks associated with the shipment.
FOB prices are typically cheaper than CNF (Cost and Freight) because FOB only covers the supplier’s responsibility until the local port. Additional expenses, such as cargo ships, destination port processing, and trucking to the importer’s warehouse, are not included in the FOB price.
CNF means that the exporter manages all deliveries and shipping documents until the charcoal arrives at the importer’s port of destination. Throughout the entire process, including shipment abroad, the exporter handles the processing, and the risk is transferred to the importer upon arrival.
CNF also encompasses insurance for the goods, and the payment terms are flexible, allowing payment by either the exporters or the importers themselves. However, the insurance costs are higher in CNF compared to FOB.
CNF can be a favorable payment term for importers but may also pose frustrations, particularly if importers cannot pay the price upfront or miss payment deadlines.
Effective negotiation and communication between both parties are essential. Most coconut charcoal briquettes are delivered using FOB Incoterms. However, some importers prefer CNF.
For importers, it’s crucial to negotiate effectively with suppliers and maintain a good working relationship. Importers should also manage their cash flow and understand their expenses to avoid unprepared payments.
To learn more about the expenses of importing coconut charcoal briquettes, you can refer to our article.
These insights should help you navigate the international trade of coconut charcoal briquettes with a clearer understanding of the associated Incoterms and their implications.
