Chapter 1: Introduction

1.1 Introduction

Various studies have examined the effects of FOB and CIF on the distribution of responsibilities and risks in international sales contracts, and their conclusions are presented in this chapter. Chapter organization: Part 1 is shown below 2. The study's background and definitions of FOB and CIF in the context of the export and import sectors are provided in 2. Section 1.3 lays out the study issue and stresses the need to comprehend these terms. The study's aims and research questions are presented in Sections 1. 4 and 1. 5, which help to restrict the subject. The study's academic value and applicability are detailed in Section 1. 6. The chapter comes to a close and the following one begins with Section 1. 7.

1.2 Background to the study

The buyer's obligations under FOB become effective once the goods are loaded onto the ship. Therefore, going forward, the client is fully responsible for any loss or damage to the products. The main carrier booking and payment, insurance, and destination import registration are all included in this. The buyer must take all necessary precautions and plans ahead of time to avoid any discomfort or accident that may occur during the maritime transit.

CIF, which stands for "Cost, Insurance, and Freight," is an improvement over FOB in terms of the seller's duty extension. According to the CIF conditions, the seller is responsible for loading the goods onto the ship and paying for their transportation to the specified port of destination. For the same reason, the seller is obligated to acquire marine insurance to cover the buyer's goods while they are in transit [3].

The Foreign Chamber of Commerce found that in 2021, FOB and CIF terms were employed in over 60% of overseas sales contracts. For all parties involved in international business to comprehend the implications of these expressions, the following facts demonstrate how they guarantee worldwide trade.

Although these expressions are basic and used practically everywhere, they might be misused or misunderstood, which can make international business connections more difficult. A little inefficiency, major legal problems, and financial complications are all possible outcomes of such a lack of knowledge. The lack of legal expertise among certain businesses, particularly SMEs, can make these terms and international trade legislation difficult to understand and implement [6].

1.3 Research opportunity/problem

International sales of commodities rely heavily on the terms FOB and CIF, which are utilized frequently in contracts of sale but are poorly understood by businesspeople on the rights and duties of sellers and buyers. Lack of clarity in the law causes confusion, which in turn causes questions and ambiguities in the law, and often a hefty price tag.

This study seeks to improve understanding of FOB and CIF terms in modern international trade to address these research prospects. The results of this study may help businesses, governments, and the methods used in cross-border trade.

Footnotes:

[1] E Plomaritou and I Voudouris, 'The Relationships of Bill of Lading, Charterparty, and Other Transport Documents' (2019) 24 Journal of Economics, Management and Trade 1.

[6] AR Admati, 'A Skeptical View of Financialized Corporate Governance' (2017) 31 Journal of Economic Perspectives 131.

[7] Global Trade Review, 'SME Trade Finance Survey 2023' (GTR 2023).

1.4 Purpose of the study/motivation

1.5 Research objectives and questions

Research objectives:

1. Discuss the main components of the FOB and CIF terms that outline the responsibilities of buying and selling of goods in international sale of goods contracts.

2. How do FOB and CIF terms impact contract formation, performance, breach, and remedies in international sales contracts?

3. What steps can businesses take to ensure compliance with FOB and CIF terms in international sales contracts?

1.6 Contribution of the study

This research will provide a comprehensive overview of the state of FOB and CIF developments and applications for international trade lawyers in the current literature. It can be applied in contract preparation, and interpretation as well as the resolution of conflicts.

Last of all, it will be a development to the existing knowledge in international business and trade law. Educational institutions and industry training certification bodies can also incorporate the data and research into academic curricula and trade association standards to enhance future business leaders' and legal professionals’ understanding of these important trade terminologies.

1.7 Conclusion