A buyer asked me to quote a price per ton CIF. I do not understand these terms or how to price for export. Help.
3 Answers
Export prices are quoted using Incoterms, which decide who pays for what part of the journey. The common ones: FOB (Free On Board) means your price covers everything up to loading on the ship at the Indian port, and the buyer pays sea freight and insurance onward. CIF (Cost, Insurance, Freight) means your price also includes the sea freight and insurance up to the destination port. EXW (Ex Works) means the buyer takes it from your farm or warehouse. To quote CIF you must add: your farm cost, grading and packing, inland transport to port, port and CHA charges, documentation, sea freight, marine insurance, and your margin. Get current freight rates from a freight forwarder before quoting CIF, because freight changes a lot. For beginners, quoting FOB is simpler because you do not carry the freight risk. Always state the Incoterm, currency, quantity, quality spec and validity of your quote clearly in writing.
Start with FOB quotes as a beginner. CIF means you carry the freight risk and freight rates jump around. Once you understand freight, then offer CIF.
Always put a validity date on your quote, like valid for 7 days. Freight and exchange rate move, and an old quote can make you lose money.