It’s time for our weekly Reader’s Question post! And this time I’m actually doing an update on an older post as it seems that many people are still confused about the various terms used when importing products from China!
CNF, CIF, FOB, Ex-Works – what does it all mean? And most importantly – which of these shipping methods is most cost effective?
Let’s find out!
My congratulations, your blog is very, very helpful (the most helpful information I have found in one blog so thank you for that!).
But I still have a couple of questions which I hope you’ll be able to help me with.
For about two months I’ve been dealing and negotiating with a Chinese fabric supplier. I’m going to order 500m from various designs and the final price we’ve agreed is $3.37/m CNF London. The price is good so I would like to proceed and organise shipping.
But I’m completely lost on where to start…
What exactly does CNF London mean?
Could you explain to me how it works, step by step, from beginning to end? First I pay for my goods, and then what happens after that?
The supplier suggested that we use a smaller price on the invoice than what I’m actually paying to lower the cost of import tax and duty. Do you think this is a good idea? To me it sounds like fraud but I wanted to get the advice of someone with as much knowledge as yourself.
I would need to pay $1685 for my 500m of fabrics. What about the rest of the costs? How much are taxes and duties in the UK? And when do I need to pay them?
Does CNF London mean I have to collect my goods from a port in London? I live in London so this won’t be a huge difficulty, I’m just confused about how it works.
I am sorry for asking so many questions but when I think about all of these things it turns into a bit of a nightmare! I hope you can help clarify some of it for me.
Kind regards and many thanks!
Okay, let’s start with the basics. When dealing with suppliers from China, you’ll often be offered 4 types of pricing:
FOB – Free on Board (or Freight on Board). This basically means that the cost of delivering the goods to the nearest port is included but YOU, as the buyer, are responsible for the shipping from there and all other fees associated with getting the goods to your country/address.
EXW (Ex-Works) – also sometimes referred to as the Ex-Factory price. This basically means the cost of the product and nothing else! No shipping costs or export fees in China are included in this price, never mind local port and custom fees or delivery to your door.
CIF – Cost, Insurance and Freight. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. But only to the port – from that point onwards, you take the shipment into your hands.
CNF – Cost & Freight (or Cost, no Insurance, Freight). Similar to CIF only this time insurance is not included.
If your supplier quoted you a CNF London price, this means that the price includes shipping of the goods via sea freight to London port. When the goods arrive, you’ll have to organise customs clearance and delivery to your home/office/warehouse. [Read more…]