BS (MARITIME & BUSINESS MANAGEMENT)[2]-2 (A) Morning/[2]-3 (A) Morning

Assignment: 2 marks

Upload your answers to LMS/E.mail on time.

1. Difference between CIF and FOB?

Answer:
CIF (Cost, Insurance and Freight):
contracts are involved with international export sale contracts also called ‘export
transactions’,
 In CIF agreements it is the seller who is under the obligation to fix the vessel.
 the c.i.f. contract involves an all-in quote by the seller who carries the risk of any
increase (and the benefit of any reduction) in the cost of carriage,
 C.i.f. contracts the seller is the original party to the carriage contract – e.g. a
voyage charter party, a contract of affreightment or liner booking – and the terms
of its agreement with the carrier will always be found in that original contract. as
soon as a negotiable bill of lading is transferred by the seller to the buyer in
exchange for payment, the buyer acquires rights of suit under the contract
evidenced by the bill.

FOB (Free On Board):

contracts are involved with international export sale contracts also called ‘export
transactions’,
 In FOB agreements it is the buyer who is under the obligation to fix the vessel.
 The f.o.b. contract provides for the seller to conclude a contract of carriage as an
agent for the buyer, at all material stages the original party to the contract of
carriage with the carrier; the commodity will be still invoiced by the seller at
f.o.b. rate
 In case of bare f.o.b. contracts, where the charterparty (maritime contract for hire
of ship) is negotiated and fixed by the buyer as charterer (The charterer pays for
all operating expenses, including fuel, crew, port expenses and P&I and hull
insurance.), the buyer is and will always be the carrier’s original contractor and
the terms of the agreement between buyer and carrier will be – at all material
times – contained in the charterparty, whether or not a bill of lading is issued and
tendered.

Dr. Yasmeen Zamir Maritime Sciences

 BS (MARITIME & BUSINESS MANAGEMENT)[2]-2 (A) Morning/[2]-3 (A) Morning

2. List types of documents mentioned for trade and shipping. (Make table
S. No, Name of doc, function of doc/in points/remarks.)

S. Name of Doc Function of Doc

No.
1 The sale contract covers Naturally the buyer is entitled to carriage
arrangements it has stipulated for in the contract of
sale. So if the sale contract provides for a vessel of a
given class or tonnage, imposes restrictions on
previous cargos or flag, reefer temperatures or any
other specific requirements, the seller shall make the
transport arrangement it promised.
2 The letter of credit A letter of credit is a promise by a bank to pay to the
beneficiary – qua seller – up to the amount of the
credit against presentation of the documents stipulated
therein.
3 Documentary sales The duty to tender documents together with (and at
times instead of) goods is deeply embedded in the
concept of shipment sales which are also referred to as
documentary sales on shipment terms.
It can be said that two documents are essential to every shipment sale:
1 The commercial invoice a commercial invoice is a customs document. It is
used as a customs declaration provided by the person
or corporation that is exporting an item across
international borders. ) with which the seller quantifies
its credit and a clean shipped on board
2 bill of lading (A bill of lading is a legal document between the
shipper of goods and the carrier detailing the type,
quantity and destination of the goods being carried).
If the goods are sold on c.i.f. terms the seller will also need to tender an
1 insurance policy covering marine risks and any additional risks agreed
in the sale contract.
2 document of title A negotiable document of title giving the bank
constructive possession of the goods.
3 the bill describe the goods in a way which is not inconsistent
with the description of the goods in the credit;
(ii) contain data which is not conflicting with data in
other parts of the document, any other stipulated
document or the credit; and
(iii) bear no clause or notation expressly declaring a
defective condition of the goods or their packaging.

Dr. Yasmeen Zamir Maritime Sciences