FOB and CIF are two delivery terms used in export contracts. Wood and coffee are major Vietnamese exports within the broader agricultural, forestry, and seafood sectors. Which term should Vietnamese agricultural, forestry, and seafood exporters choose, and which offers the most appropriate benefits for their operations?
The shift from FOB to CIF in agricultural, forestry, and seafood exports
The COVID-19 pandemic disrupted international trade worldwide. For Vietnam's agricultural, forestry, and seafood exports , it encouraged a shift from FOB terms to CIF, largely because shipping line and agent freight rates rose sharply after the pandemic began.
From 2020, ocean freight rates from Asia to the Americas and Europe increased to five or six times their pre-pandemic levels, changing the terms negotiated for Vietnamese agricultural and forestry exports.
In coffee, many buyers began requesting CIF instead of FOB contracts. A Vietnam Coffee Association report cited in the article states that 35% of Vietnamese businesses switched to CIF pricing between 2020 and 2021. Wood product exporters experienced a similar trend.
These developments encouraged Vietnamese exporters to move from FOB toward CIF. Under FOB, some exporters faced additional charges and surcharges imposed by shipping lines even though the buyer paid the main freight.
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Why the article favors CIF for exporters
Taking the strengths and weaknesses of both terms into account, CIF can offer domestic exporters the following advantages:
Greater control over export transportation
With CIF exports, the exporter arranges transportation and can obtain more direct visibility into the shipping schedule. This helps the business choose shipment timing and follow up on transport progress.
Reducing carrier-related risks to cargo quality
Under FOB, the importer selects the shipping line. A buyer seeking lower costs might choose a lower-quality service or a longer routing, potentially affecting agricultural and seafood products sensitive to extended transit or unsuitable storage. Under CIF, the exporter selects a carrier that can meet the shipment's transport and storage requirements, negotiates transit timing, and works to avoid delays caused by vessel availability or similar issues.
Negotiating freight savings and potential commissions
Control over transport and insurance arrangements gives the exporter scope to negotiate rates, premiums, and timing. Shipping before or after peak periods, such as year-end and major holidays, may reduce costs.
Direct negotiation with the shipping line or ocean freight agent also lets exporters address surcharges and agree that no charges outside the contract will apply.
Direct dealings with carriers and cargo insurers may also make commissions available to the exporter, as described in the source.
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Increasing the quoted export value
In practice, FOB export prices are lower than CIF pricesin part because FOB excludes main ocean freight and cargo insurance.
The source also argues that buyer bargaining pressure can keep FOB product prices low, with a lower price becoming a condition for concluding the sales contract.
It therefore presents CIF as an opportunity for exporters to increase the quoted value of their goods.
FOB and CIF offer different advantages and limitations. While FOB can reduce some responsibilities, the article argues that it can also constrain exporters' development. Moving to CIF for agricultural, forestry, and seafood exports may increase the quoted export value and strengthen Vietnamese businesses' international trade capabilities.