Expert: Davide Andrew Papa - 5/20/2003

Question
Hi,

I am a fellow expert in home entertainment.
Recently I wrote to a Chinese cable supplier and he quoted me prices CIF and CNF ? what's that terminology ? I know it is widely used but this is not my field, can you help ?

Thanks in advance

N George

Answer
Dear George

Be careful when dealing with Chinese Sellers...Make sure everything is 100% tight...and make sure your advising bank is the BANK OF CHINA NEW YORK via chinese suppliers in China,,NO SUCH TERM CNF

It's either C.I.F or  C and F

C.I.F is quoted to include INSURANCE
C and F is quote as COST AND FRIEGHT without insurance...

It is acceptable to deal C and F...
It's  about 15 percent cheaper to quote without insurance..(lloyds of London open cover is the best)

The shipper guarantee the dilivery of your product should the ship shink in transit...but wont guarantee your products against damage  and other things like Act of War or Piracy...That guarantee comes with the insurance contract that either you or the seller arranges...and becomes part of the documentation that MUST BE SUPPLIED if the seller sells at CIF....to be able to draw against your CREDIT upon DELIVERY



As you are aware delivery means DELIVERED to the ship at port in CHINA and not delivered to you in your country...Once the Delivery has occurred the Chinese seller are able to draw on your CREDIT,and you will get your products a few weeks later when the ship arrives at your Port...

ENSURE that UCP500 rules are applied on your contract,as Bank of China does deal in such Banking rules...UCP500 procedures will at least guarantee that they cannot touch your money until the products have been Delivered...as per the stipulation of your credit(L/C)...Its fairly safe to deal C and F...but its much better obviusly to deal CIF...remember...?The Sellers are entitled to be paid once the products pass the ships rail in China Port...and your L/C is irrevocable which means if the products arrive damaged...then its your responsibility,and you cannot get your money back

But UCP500 protects you in that the Documents that need to be Delivered giving you TITLE to the goods on board belong to you only and that when the ship arrives the products on board will at least MATCH the delivered Documents description as advise on your L/C terms and conditions...

(1)Full Quote first
(2)CONTRACT second as per UCP500
(3)YOU ESTABLISH THE Irrevocable L/C FIRST as per UCP500
(4)CHINESE SELLERS establish 3 to 5 percent
Performance Guarantee in the form of a unconditional STANDBY L/C if they are one day late in Delivery you will still get your product,but your bank will also collect the PG for you to keep...unconditionally..
(5)The Products are loaded on board in China Port
(6)Copy of Documents are sent to your bank via Air mail
(7)Chinese collect on your credit,so long as all the terms of the credit have been meet...
(8)Ship leaves Chines Port
(9)Ship arrives at buyers Port
(10) Buyer presents documents to collect goods
(11)Deal doneany damage of goods are claimed against insurance if Buyer has insurance policy.

Contact has nothing to do with Finance and cannot stop your credit being collected if the buyer meets the term of your L/C

I hope this helps...A great deal of private information is available on my site www.ftnexporting.freeservers.com
which will assist your further...

Just make sure that your Credit and your Contract state the fiollowing term at all times...Your ACC or UCC banking protocol(USA) is not strong enough to tackle problems associated with Chinese buyers or sellers..
so only deal with a Majoe bank who deals in UCP500
trading terms,when you open your credit...

"This contract follows the terms and conditions as applicable under the Uniform custom and practices as per current  UCP500 banking protocol, as well as trading terms defined as INCOTERMS 2000;All documents must be in English:Electronic UCP500 not allowed:(eUCP500)Trans shipment not allowed:transferable credit not allowed

I hope the above helps...Just Make sure NO MISTAKES and CLEAR understanding are established with chinese sellers as they nearly always want to change a deal after they get your money,because many simply Don't understand International trading procedures...Be firm and strict...otherwise look elsewhere...This is something I do know about personally after a number of bad experiences i've hand with Chinese BUYERS and SELLERS...which cost me dearly...

As you can already see...CNF is a bad indication:
Regards
Davide Papa